2018 AE M&A: Mid-Year Review

US design firm deals up 28% in the first half of 2018 compared to the first half of 2017; California and Texas see the most deal-making

Morrissey Goodale reported 133 US deals in the first six months of 2018 as compared to 104 over the same period in 2017. This marks not only a surge of deal-making from the year before, but also represents the highest deal count through the first half of a calendar year, even outpacing the first six months of 2015, the year industry M&A reached an all-time high. In 2015, we tracked 128 US deals over the first six months.

From January 2017 through June of 2018, California reclaimed the top spot as the hottest state for M&A activity, with Texas a close second. California saw 47 deals during that time period compared to Texas’ 37 deals. The entire Western States region¹, led by California, has enjoyed a steady, robust stream of deals over the past three years, recording 56 transactions in 2015, 58 in 2016, and 55 in 2017. With 35 deals tallied through the first six months of 2018, the Western States region is on pace to see an increase this year over the last, further cementing the region as a magnet for AEC M&A.

A review of the 2018 mid-year M&A stats also reveals the following:

• There were 60 international deals in the first half of 2018. This is up from 48 international deals during the prior mid-year period. The global deal count of 193 during the first six months of 2018 is also just ahead of the 189 deals reported in the first half of 2015.
• In the first half of 2018 , inter-state deal activity (defined as a firm headquartered in one state acquiring a firm headquartered in another) accounted for 61.7% of all 133 US deals, slightly up from 60.2% in the first half of 2017.
• California remained the single hottest state for M&A activity status, with 21 deals in the first half of 2018 as compared to Texas, the next hottest state, which saw 14 deals. The Golden State is on pace to see a record number of deals in 2018 by a healthy margin. Deal count highs in California reached 26, in both 2015 and 2017. Massachusetts, New York, and Ohio are also on pace for a record number of deals in 2018.
• In the first half of 2018, 8 international firms bought into the US and 9 US firms acquired abroad. The latter point illustrates a new trend as there were only 2 US buyers of international firms in all of 2017. So far in 2018, US buyers acquired in Canada, Great Britain, Australia, China, and Denmark.
• The median acquiring firm in the first half of 2018 generated $125 million in revenue – up from $105 million in all of 2017. This indicates M&A activity has involved larger buyers so far in 2018.

¹The Western States region includes Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, New Mexico, Nevada, Oregon, Utah, Washington, and Wyoming.