blog > I Heard the News Today, Oh Boy.
I Heard the News Today, Oh Boy.
by Mick Morrissey
PE firms and family offices are turning their attention to the architecture space.

I Heard the News Today, Oh Boy.
Another architecture firm recapitalized by private equity (PE). Surprising? Not really. Designers (inclusive of all capes, berets, and black turtlenecks) are becoming the “next big thing” to be recapitalized and consolidated in the larger U.S. AE and environmental consulting industry. The PE firms and family offices that have been focused on rolling up the engineering, construction services, and environmental sectors are now—like the Eye of Sauron—turning their attention fully to the rarefied world of high design.
1. Then (Calm Before the Storm): Architecture and AE firms (those “fully integrated” design firms that primarily lead client engagements with architectural services) make up about 30% of the firms in the larger U.S. AE and environmental consulting industry. One could reasonably expect that—all things being equal—this industry sector would see about 30% of industry consolidation. But that was not the case pre-pandemic. Prior to 2020, the architecture vertical annually represented between 10% and 12% of total industry consolidation. A primary driver of this was a lack of serious demand because the largest architecture and AE firms have not traditionally grown through acquisitions. There had been some consolidation of larger architectural brands by national and global EA firms immediately before (RTKL) and after (Callison, Burt Hill, VOA) the financial crisis. But the vast majority of architecture transactions pre-2020 were small. Average seller revenues were in or around $3 million. Essentially, consolidation of architecture firms consisted of smaller, founder-run firms selling their assets to a larger design firm at or close to book value. Very little cash was involved. Essentially these deals represented the death throes of firms and cheap transfers of clients, staff, furniture, and risk. There was virtually no PE involvement.
2. Now (Riders on the Storm): The new wave of architecture consolidation began in 2020 with the recapitalization of PBK (ENR #95). Since then at least 16 top ENR 500 and leading designers have recapitalized or sold including Ratio Architects (ENR #304), Huckabee, CPH (ENR #293), EYP, Zyscovich, Foster + Partners, SB Architects, IBI Group, e4h, Sheehan Nagle Hartray, DGA (ENR #267), Populous (ENR #68), MOREGroup (ENR #102), LEO A DALY (ENR #191), Grace Hebert Curtis, and, most recently, McMillan Pazdan Smith (ENR #273). Of these, all but three have involved recapitalization by PE or a family office or sale to a PE-backed acquirer. In 2024, the percentage of all acquisitions involving an architecture or AE firm has jumped to a whopping 25%. And the median size deal is increasing. The architecture space is heating up and looking more and more like its infrastructure and environmental cousins when it comes to consolidation.
3. Why now? Architecture and AE firms face the very same leadership and ownership transition challenges as their engineering and environmental peers. Firm founders or second- and third-generation leadership teams just don’t believe that the amorphous and mysterious “next generation” possess either (a) the competence or (b) the capital to pursue an internal transition or fund their ambitious shared vision. In this regard, nothing has changed since before 2020. What’s different now is that there is more demand in the form of PE and family offices. The results? More transactions, higher valuations, and larger deals.
4. Who? Two weeks ago at our Texas and the South M&A and Business Symposium, my colleagues Nick Belitz and Jon Escobar shared a jaw-dropping piece of market intel (Figure 1). There are now 120+ PE and family office platforms in the AE, construction services, and environmental consulting industry. Many financial sponsors (another term for a PE firm or family office) are behind multiple industry platforms. For example, it’s common for a financial sponsor that really understands the ins and outs of this industry to have an engineering platform, an environmental consulting platform, and a construction services platform. These are three different branded firms representing non-competitive investments in adjacent, sometimes complementary, sectors of the industry. What you’re seeing now is those financial sponsors who have been successful in either the engineering, construction services, or environmental consulting spaces making investments in the architecture sector. And they are moving swiftly.

5. Next: Given the inquiries that we are handling from financial sponsors already in the industry and from industry wannabes, it’s reasonable to expect that consolidation and recapitalization of the architecture space will increase over the next couple of years to reflect its 30% of the industry population. Architecture firms, more so than their engineering and environmental consulting cousins, typically have a much more difficult psychological battle with the “practice-focused business versus business-focused practice” model. Time will tell if the financial sponsors can provide them with the therapy to resolve that.
To contact Mick Morrissey, email him at [email protected] or text him at 508.380.1868.
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