Western States M&A by the Numbers (Part 2)

Western States M&A by the Numbers (Part 2)

Last week saw the announcements of another three acquisitions of design and environmental consulting firms in the rapidly consolidating West. Taken together, they hinted at the parallel waves of consolidation that are reshaping the AE industry’s competitive landscape west of the Rockies. The first wave is intrastate—when both buyer and seller are headquartered in the same state. The second wave is interstate—when the deal involves an out-of-state buyer. Here’s how these two waves have been playing out in each Western state since 2018 (when industry M&A dramatically took off).

• California: Sixty-five percent of acquisitions in the Golden State are interstate, with firms from Florida and New York leading the charge. The balance of acquisitions are by definition intrastate (as was the most recent California transaction), largely following a defined north-south pattern—with firms from Southern California looking to expand in the northern part of the state and vice versa (with a modicum of Inland Empire action). 
• Colorado: A whopping 87% of acquisitions in the Centennial State are interstate. Firms from Illinois and California have been the most active out-of-state buyers since 2018. At 13%, intrastate deal-making is relatively low compared with other Western states. 
• Washington: Over three-quarters of the consolidation in the Evergreen State is a result of out-of-state buyers entering or growing their presence in the market via acquisition. The state has been a particularly popular destination for acquirers out of Texas and California and also neighboring states such as the deal announced last week. Twenty-three percent of deals are intrastate.
• Arizona: The Grand Canyon State—and its potential for growth—places it high on the destination list for many national and global AE firms. So, it’s not surprising that over 88% of the deals there involve an out-of-state buyer. Firms from Florida, Texas, and Iowa have shown a keen interest in growing their businesses there. At just under 12%, intrastate M&A activity is comparatively low. 
• Oregon: Close to three-quarters of the transactions in the Beaver State are made by out-of-state buyers with many of these being from adjacent Western states.
• Nevada: In the West, the Silver State has the distinction of having the highest interstate consolidation percentage. Nine in ten deals done in Nevada involve an out-of-state acquirer—with a large portion being from California. The state has the lowest level of intrastate consolidation in the West at just 10%. 
• Idaho: Six in ten deals in the Gem State involve out-of-state buyers—as is the case in the most recent announced transaction. The state has a healthy internal consolidation rate of 40%.
• Utah: It’s no surprise that, as one of the fastest-growing states, the Beehive State sees a relatively high interstate deal level of 70%. Intrastate deals hover around 30%.
• Montana: The Treasure State also has a relatively high level of out-of-state buyers at 67%. Buyers come from neighboring Wyoming as well as Minnesota, Illinois, Louisiana, and California.
• Alaska: One might expect Alaska to have a relatively low level of out-of-state buyers. But one would be incorrect. As a group, they have accounted for over seven in ten deals since 2018, with South Dakota-based firms being notable entrants into the market.
• Wyoming: If we’re talking M&A, then the Cowboy State could be renamed “The Balanced State.” It’s the only state in the West that has an equal amount of interstate and intrastate deal-making. 
• Hawaii: The Aloha State sees a relatively high level of interstate deal activity. Eighty percent of deals involve an out-of-state buyer with firms from Washington State being the most frequent flyers. 
• New Mexico: The state has a relatively high rate of interstate consolidation at 87.5%. Out-of-state buyers come from as far afield as Massachusetts and Virginia.

Overall, the Western states are seeing far more interstate deal activity. This is not a surprise. Most ENR 500 firms are headquartered east of the Rockies. For them to be considered national players, they need to have brand recognition and capabilities in the West. The fastest way to achieve this is through multiple acquisitions.

To learn more about M&A opportunities and trends not only in the West, but also nationally, join the over 200 AE industry executives, investors, and experts at the five-star Wynn Resort in Las Vegas from June 11-13 for the 11^th annual Western States M&A and Business Symposium. The symposium agenda is once again packed with presentations, interactive panels and workshops, networking receptions, an Excellence in Acquisitive Growth Award ceremony, and exclusive CEO networking dinners on the Las Vegas Strip. Reserve your place today and save. Early-bird registration is available until April 18. 

You can contact Mick Morrisey at [email protected] or 508.380.1868.