Word on the Street: Issue 179

There will be no Word on the Street next Monday in recognition of the Martin Luther King Jr. holiday. Look for the next edition on January 22.

Nine Movers and Shakers to Watch in 2024

2023 was a big (but not the biggest) year for industry consolidation. Some 430 design and environmental firms were acquired or merged last year, down almost 11% from the record 480-plus transactions in 2022. For all intents and purposes, deal-making returned to 2021 levels, most likely due to elevated interest rates impacting the decision-making of a number of potential acquirers.

But even as overall industry consolidation slowed in 2023, there were a number of firms that made multiple acquisitions in pursuit of their strategic objectives. Today we take a look at nine of those firms—the nine movers and shakers that made the most acquisitions in 2023. Among them, they made 59 acquisitions last year (collectively they were acquiring about five firms a month) and were responsible for almost 14% of the consolidation that took place in 2023. Let’s take a closer look at these industry movers and shakers:

1. Bowman Consulting Group (Reston VA) (ENR #87) (NASDAQ: BWMN): Bowman announced 12 acquisitions in calendar 2023, including the addition of full-service engineering firm Hess-Rountree (Phoenix, AZ) in December. Since going public in 2021, Bowman has been on an impressive growth trajectory, jumping 31 places on the 2023 ENR Top 500 Design Firms list. Acquisitions continue to be a core part of the firm’s growth plans. Per Gary Bowman, chairman & CEO, in the firm’s Q3 earnings call last November, “I am pleased to report that our (M&A) pipeline remains full of adjacency-focused opportunities within our target size and profile. We expect to continue to be active acquirers during the remainder of this year and into 2024.” Last year, the firm added some 400 employees in 11 states—AZ, NM, CA, NV, SC, OK, TX, NY, FL, MD, and GA—through acquisitions.

2. UES (ENR #26) (Orlando, FL): This fast-growing, privately held, 4,000-person engineering and consulting firm announced seven acquisitions in 2023. The firm made two acquisitions in Houston alone last year—the first in June of 170-person Riner Engineering and the second in December of environmental consultant InControl Technologies. In calendar 2023, UES added over 300 employees through acquisitions in TX, AR, FL, and AL. The firm rose six places on the 2023 ENR Top 500 Design Firms list. 

3. RMA Companies (Rancho Cucamonga, CA) (ENR #146): This technology-enabled laboratory testing, inspection, and quality management services firm received a strategic investment from OceanSound Partners, LP in September 2021. Since then, RMA has gone on to make multiple acquisitions, including seven that it announced in calendar 2023. Its most recent acquisition was in December of 300-plus person geotechnical engineering, environmental consulting, material testing, and ground motion consulting firm Rone Engineering (Dallas, TX). Over the past year, RMA added close to 600 employees through acquisitions in TX, CA, FL, NY, and WA. RMA rose 36 places on the most recent ENR Top 500 Design Firm list.

4. Verdantas (Dublin, OH) (ENR #149): Backed by private equity firm RTC Partners, this 1,000-person environmental consulting, sustainable engineering, modeling, and digital technology firm made six acquisitions last year. It rounded out 2023 with the acquisition of GRP Engineering (Petoskey, MI), a utility consulting and electrical engineering firm serving the power market. Over the course of 2023, Verdantas added close to 500 employees through acquisitions in MI, OH, NJ, SC, PA, and CA. The firm rose 46 places on last year’s ENR Top 500 Design Firm list. 

5. SAM, LLC (Austin, TX) (ENR #88): One of the nation’s largest geospatial and inspections firms also announced six acquisitions in calendar 2023. Backed by Peak Rock Capital in 2021, SAM’s most recent acquisition was that of full-service geomatics firm Wellston Associates (Warner Robins, GA) in October of last year. In the course of 2023, SAM added over 100 employees in WA, SC, TX, GA, and MD through acquisitions. The firm jumped 15 places on the 2023 ENR Top 500 Design Firms list.

6. IMEG (Rock Island, IL) (ENR #57): With a focus on the built environment, building optimization, infrastructure, planning, and construction engineering-related services, this 2,200-person national engineering and design firm—and recipient of the 2023 Morrissey Goodale Most Proficient and Prolific Acquirer Award—also announced six acquisitions last year. It made two impressive acquisitions in New York alone, namely Lilker Associates (New York, NY) and Cameron Engineering & Associates (Woodbury, NY). IMEG jumped 14 places on the 2023 ENR Top 500 Design Firms list and added some 350 employees through acquisitions in PA, FL, TX, and NY.

7. Salas O’Brien (Irvine, CA) (ENR #54): With locations across North America and 2,400-plus employee owners, this engineering, construction management, technology, and commissioning firm made five acquisitions in 2023. The firm’s most recent acquisition was of EME Consulting Engineers (New York, NY) in August. Salas O’Brien added over 300 employees through acquisitions in 2023 in CA, GA, OH, NY, and FL. The firm jumped 24 places on this year’s ENR Top 500 list.

8. Atwell, LLC (Southfield, MI) (ENR #74): This fast-growing, privately held, full-service consulting, engineering, and construction services firm that serves the real estate and land development, power and energy, and oil and gas markets made five acquisitions last year. Its most recent was of civil engineering and land surveying firm Summit Engineering Group (Heber City, UT). The firm added over 150 employees through acquisitions in UT, WA, MD, and FL in 2023 and climbed seven spots on the ENR Top 500.

9. NV5 (Hollywood, FL) (ENR # 22) (NASDAQ: NVEE): Rounding out the top nine movers and shakers of 2023 is NV5. This publicly traded, leading provider of technology, conformity assessment, and consulting solutions for public- and private-sector clients supporting infrastructure, utility, and building assets and systems also announced five acquisitions last year with the largest being that of 340-employee Axim Geospatial (Sun Prairie, WI) in February. In 2023, NV5 added over 370 employees through acquisitions in WI, FL, IL, and CO. The firm rose two places on this year’s ENR Top 500 list.

Why the focus on employee count? The biggest challenge that our clients and the industry face headed into 2024 is finding and keeping good talent. (If you feel like you’ve been hearing this same story for over a decade, you’re not wrong.) Over 70% of the attendees already registered for our upcoming Southeast M&A and Business Symposium this March cite hiring and retention as their #1 business issue. However, these nine movers and shakers are cleverly using acquisitions to find talent (as well as open up new markets and geographies and shore up service capabilities). Between them, they added over 3,000 new employees through acquisitions last year. This is a testament to their human resources teams and systems. As skilled acquirers, they are also improving their annual staff turnover rates. Our Excellence in Acquisitive Growth Awards research shows that skilled acquirers see voluntary turnover rates cut by almost one-fifth a year into their transactions. One reason for this is that these nine firms are creating more opportunities for the new employees post-transaction. Another is that these firms are bringing improved benefits to employees at a lower cost to them as individuals.

Just how good are these nine firms? These nine leading industry firms are not only really good at serving their clients and creating opportunities for their employees, they are also extraordinarily skilled at acquiring and integrating firms. One of the most remarkable features of these firms is the cadence of their acquisitions. To illustrate that point, prior to 2018, the most active acquirers in the industry each made an average of two (yes, two) acquisitions a year. Each of these nine firms is sourcing and on-boarding acquisitions at a markedly higher pace. It’s a testament to the competency of their M&A teams.

What’s missing? Last year there was a notable absence of any single mover or shaker making multiple acquisitions of architecture firms.

Want to know more? At the Southeast M&A and Business Symposium in Miami this March you’ll hear C-suite executives from movers and shakers Bowman and IMEG share their perspectives on both the future of the industry and what’s next for M&A during panel discussions. You’ll also have the opportunity to network with executives from movers and shakers Verdantas, Atwell, Salas O’Brien, and UES among hundreds more from national and regional firms.

To connect with Mick Morrissey, email him at [email protected] or text him at 508.380.1868.

Designing Excellence: 6 New Year’s Resolutions for AE Firms in 2024

As we step into 2024, another year that will be increasingly defined by dynamic shifts in the AE industry, it’s time for you to start framing what success will look like for your firm this year and how you’ll go about achieving it. Forget the clichés of hitting the gym or learning a new language; let’s focus on resolutions that will shape your firm’s future. Here are six resolutions to consider for your firm in 2024:

Resolution #1: Invest in people development like you mean it.

In this age of astonishingly rapid digital transformation, it’s easy to overlook the essence of any organization—its people. We can be quickly captivated by the allure of cutting-edge tools and automated processes. But in this quest for efficiency and innovation, our people often take a backseat as our focus shifts toward technological progress over human dynamics. So, prioritize investment in your workforce. Cultivate a workplace culture that not only attracts top talent but also retains it. Implement mentorship programs, skill development workshops, and opportunities for cross-functional collaboration. Your firm’s strength lies in its high-performing teams, so make 2024 the year you build a workforce that can create and sustain them.

Resolution #2: Revamp the way people produce the firm’s work.

If your internal processes resemble a maze, it’s time for a makeover. Channel your inner efficiency expert and declutter those workflows. Streamline communication, leverage digital tools, and establish a seamless project management system. Delve into the nitty-gritty of your workflows, identify bottlenecks and redundancies, and reimagine your processes. Embrace agile methodologies to enhance adaptability in the face of evolving project requirements. The goal is to eliminate the unnecessary and create an environment where creativity can flourish without the hindrance of administrative chaos.

Resolution #3: Elevate your firm’s brand in a big way.

In a world of ever-changing trends, staying ahead is paramount. Make your firm the AE equivalent of a cutting-edge technology—sleek, innovative, and in high demand. Resolve to enhance your market position by embracing sustainable practices, incorporating leading-edge technologies, and staying attuned to emerging industry trends. Craft a compelling narrative that highlights your firm’s unique approach, emphasizing the value it brings to clients in navigating contemporary challenges. Invest in visually striking and informative content—including videos, case studies, and thought leadership pieces—to establish your firm as an authoritative voice in the industry. Actively engage with your audience through social media platforms, fostering a community around your brand. Collaborate with influencers or industry experts to amplify your reach. Implement client-centric branding strategies that communicate your firm’s adaptability and responsiveness to client needs. Regularly evaluate and evolve your brand strategy to stay ahead of market expectations, reinforcing your position as a trailblazer in the AE landscape.

Resolution #4: Embrace and partner with technology.

Technology is the cornerstone of innovation in the AE realm. Beyond adopting the latest tools, immerse your firm in a culture of technological exploration. Establish an R&D division focused on experimenting with emerging technologies such as generative design, AI-driven simulations, and advanced visualization techniques. Encourage your team to attend tech conferences and workshops, fostering a mindset of continual learning. By being at the forefront of technological advancements, your firm becomes a pioneer, pushing the boundaries of what’s possible in the industry.

Resolution #5: Plan succession with precision.

Succession planning isn’t just about identifying the next in line; it’s about cultivating a legacy. Build a leadership acceleration hub that bridges the knowledge gap between seasoned professionals and emerging leaders. Encourage cross-functional collaboration to ensure a well-rounded skill set among your team members. Institute a leadership development curriculum that hones not just technical but also leadership and strategic skills. A well-executed succession plan ensures the continuity of your firm’s legacy while infusing fresh perspectives and ideas.

Resolution #6: Stabilize the firm’s future through financial strength.

Financial stability is the bedrock of sustainable, profitable growth. Dive into the financial details of your firm, conducting a comprehensive audit of expenses, revenue streams, and investment opportunities. Develop a diversified revenue strategy that mitigates risks associated with economic fluctuations. Establish a reserve fund to weather unforeseen challenges to provide your firm with the financial resilience to endure turbulent times and, finally, examine the capital structure to ensure operations and growth initiatives are adequately funded.

As we stand at the threshold of 2024, you have the opportunity to redefine your firm’s future. By prioritizing people development, refining internal processes, elevating market position, embracing technology, planning for succession, and optimizing financial performance, your firm can achieve unprecedented success this year and beyond.

For more information on how Morrissey Goodale can help you create your firm’s 2024 strategic plan, call Mark Goodale at 508.254.3914 or email [email protected].

Market Snapshot: Architecture Billings Index (ABI)

Weekly market intelligence for AE and environmental industry leaders.

As we start 2024, we’ll look at the AIA/Deltek Architecture Billings Index (ABI), which serves as a leading indicator of nonresidential construction activity. The survey results released late December by the American Institute of Architects (AIA) showed that, despite four consecutive months of weak business activity (index below 50), most firm leaders remain optimistic about 2024. Elevated interest rates in 2023 caused major projects to be postponed, but if inflation continues to cool, we might see activity pick up later this year. The survey also highlighted that 67% of respondents will be exploring M&A activity and 17% will be dealing with ownership transition issues.

Source: AIA

Don’t miss the upcoming Morrissey Goodale AE Market Intelligence Webinar on January 23, 2024. Click here to register.

To learn more about market intelligence data and research services offered by Morrissey Goodale, schedule an intro call with Rafael Barbosa. Connect with him on LinkedIn.

Weekly M&A Round Up

More Southeast deals: Last week we reported yet again more deals in the Southeast with transactions in Florida, North Carolina, and Alabama. Additional domestic deals were reported in Texas, Idaho, and Washington. You can check all of last week’s M&A news here.