US design firm deals fell 8% in the first half of 2017 compared to the first half of 2016.

Morrissey Goodale reported 98 US deals in the first six months of 2017 as compared to 107 over the same time period the year before. This is the second year in a row the number of industry M&A deals declined after the all-time high of 241 US deals set in 2015. That year, the first six months saw 128 reported US deals.

Here at Morrissey Goodale we have seen an increase of private equity (“PE”) backed deals in the global AE industry. In the first half of 2017, we recognized 19 PE-backed global deals compared to the 18 PE-backed deals in the first half of 2016. In all of 2016 there were 43 PE-backed global deals.

A review of the 2017 mid-year M&A stats also reveals the following:

• About 16% of US deals in the first half of 2017 involved a publicly traded buyer. This is up from 14% during the prior mid-year period. Last year ended with less than 10% of all US deals involving a publicly traded buyer which was down from 17% in 2015.

• In the first half of 2017, inter-state deal activity (defined as a firm headquartered in one state acquiring a firm headquartered in another) accounted for 60.2% of all 98 US deals, down from 64.5% in the first half of 2016. We note 2016’s mark was the highest level since before the Great Recession and indicates a preference among buyers to use acquisitions as a tool to expand geographic reach.

• California has retaken the top spot as hottest state for M&A activity status, with 16 deals in the first half of 2017 as compared to Texas, the next hottest state, which saw 10 deals. California also outpaces Texas with deal activity over the latest twelve months, with 27 deals to Texas’ 22 deals. Deal activity in The Golden State was driven by a combination of its diversified economy, population growth, and infrastructure investment.

• In the first half of 2017, 11 international firms bought into the US while only one US firm acquired abroad. International buyers included four from both Canada and France and one from each Great Britain, Australia, and India. The one international firm that sold to a US buyer was from Australia.

• The median acquiring firm last year generated $69 million in revenue – up from $65 million in all of 2016. This indicates M&A activity has involved somewhat larger buyers so far in 2017. Also, the median selling firm last year was $4 million, on par with the median size of a seller in all of 2016.

2017 AEC M&A Mid-Year Review Infographic >