Word on the Street: Issue 208

Mid-Year M&A Round Up and the 250 Milestone

The Morrissey Goodale Buy-Side Team came together last week in Boston for their summer strategy session and to welcome the firm’s newest vice president, David Thornhill.

It was great to see our teammates from North Carolina, Texas, New York, Florida, Illinois, and Maine. In between various team-building (ahem) activities and breaks to watch some of the more obscure Olympic events, we’re pretty sure that productive work got done. 

The Morrissey Goodale Buy-Side Team takes a well-earned break between watching Olympic Sport Climbing and Skateboarding events. 

The get-together provided an opportunity for my colleague Jon Escobar and me to review the firm’s upcoming 2024 M&A Mid-Year Review. The full report—with color commentary, insights, and more data—will be available to download on August 16 from our website. Ahead of the official publication date, here are some of the key metrics that describe how the industry has consolidated in the first half (H1) of the year.

• 250: Before we dive into the H1 stats, here’s another number to consider: 250. That’s the unparalleled milestone that we reached last week. It’s the number of successful transactions that we have helped bring to fruition for our clients. We would like to thank all our clients over the years for relying on us to assist them with their most important corporate decisions and for trusting us to help them get across the finish line (another Olympics reference). Here’s to the next 250.
• 6: That’s the number of domestic transactions announced by both LJA Engineering (Houston, TX) (ENR #67) and Atwell (Southfield, MI) (ENR #71)—the most prolific acquirers of U.S. design and environmental firms in the first half of this year.
• 243: That’s the number of domestic transactions announced in the first half of this year. This is right on pace with H1 2023 (243), but down 9% from the record 2022 H1 deal count of 268. 
• 7: That’s the number of domestic transactions announced by industry leader IMEG (Rock Island, IL) (ENR #52)—the most prolific acquirer of design firms in the first half of this year. IMEG was the recipient of the 2023 Most Prolific and Proficient Acquirer Award as part of our Excellence in Acquisitive Growth Awards Series. The firm is also one of our “Nine Movers and Shakers to Watch in 2024” (see below).
• 33: That’s the number of domestic transactions announced by our “Nine Movers and Shakers to Watch in 2024” during the first half of this year. Among them, IMEG, Atwell, Bowman Consulting Group (Reston, VA) (ENR #78), UES (Orlando, FL) (ENR #34), Salas O’Brien (Irvine, CA) (ENR #39), RMA (Rancho Cucamonga, CA) (ENR #112), Verdantas (Tampa, FL) (ENR #113), and NV5 (Hollywood, FL) (ENR #24) accounted for almost 14% of domestic industry consolidation through the end of June. 
• $4.4 billion: That’s the total revenues acquired in H1 2024, a 10% increase over the same period last year. 
• $147.9M: That’s the median-sized buyer in H1. This compares to $85.3M in the same period last year.
• $4.3M: That’s the median-sized seller in H1. This compares to $2.9M in the same period last year. 
• 11: The number of big (revenues of over $100 million at the time of transaction) firms that were acquired or recapped in H1. That’s up from eight in the first six months of 2023.
• 32: The number of mid-size and large firms (revenues over $25 million) sold or recapped in the first six months of the year. That’s up from 28 in the same period last year. And it’s a big jump from the 17 such deals in H1 2022. 
• 15: The number of ENR 500 firms that either sold or recapitalized in the first half of the year. This compares to 10 in the first half of 2023 and 8 in the same period of 2022. 
• 26: That’s the number of H1 transactions announced in California. This was followed closely by Texas (25) and Florida (24). Together, these three states accounted for 30% of all H1 transactions.
• 126: The number of H1 acquisitions made by employee-owned or ESOP buyers. This represents 52% of all H1 domestic acquisitions and is down 5% over the same period last year. 
• 42%: That’s how many H1 deals involved some form of private equity—including 13 platform investments and 88 add-on acquisitions.
• 90: That’s how many private equity firms now have active holdings in the industry. Twenty of these have multiple platform investments across distinct industry verticals (architecture, engineering, environmental, construction services). 

The full 2024 M&A Mid-Year Review report—with color commentary, insights, and additional data—will be available to download on August 16 from our website.

You can catch Jon Escobar and our entire M&A Advisory Team PLUS network with over 200 AE industry executives, investors, and experts from across North America at our upcoming 10^th annual Texas and the South M&A and Business Symposium in Houston this October.

You can contact Mick Morrissey at [email protected] or 508.380.1868. Jon Escobar is reachable at [email protected] or 224.577.8595.

The Silent Voices of Employee Surveys

For AE firms, employee surveys are like a backstage pass to the true feelings and thoughts of the team. These surveys do a lot more than just measure happiness; they help pinpoint what needs fixing, boost engagement, and steer the firm in the right direction.

But here’s the kicker: Even though firms often get a 60%-80% response rate, there’s a chunk—20%-40% of employees—that’s not chiming in. This group might include those who are the most disengaged or maybe just really busy. Let’s explore why this gap matters, what’s causing it, and how we can bring more voices into the mix.

Why AE Firms Need Employee Surveys

Employee surveys are like a secret weapon for AE firms. They give managers a direct line to the workforce, providing crucial insights into:

• Satisfaction and engagement. Finding out how happy and engaged employees are can be a game-changer. Happy teams are productive teams, and they stick around longer, too.

• Spotting trouble areas. Surveys can shine a light on what’s not working, whether it’s management issues, workplace conditions, or lack of growth opportunities.

• Building a better work environment. Asking for feedback shows employees that their opinions matter, creating a more inclusive and positive workplace culture.

• Strategic planning. The data from surveys can guide big decisions, ensuring that the firm’s goals are aligned with what employees need and expect.

The Participation Problem

A 60%-80% response rate might seem pretty good, but what about the 20%-40% who don’t participate? Their silence can speak volumes, and ignoring it can lead to a skewed understanding of the firm’s health. You need to figure out why they’re not participating and what you can do about it.

Why Some Employees Don’t Participate

• Way too busy. AE professionals are often swamped with projects and deadlines, making it hard to find time for surveys.

• A-OK. Those who are generally happy might not feel the need to provide feedback, thinking everything is fine as it is.

• I’ll keep it to myself. Employees who feel disconnected or skeptical about the process might skip surveys, doubting that their input will lead to any real change.

• Enough already. Too many surveys can lead to survey burnout, causing employees to tune out.

Why Missing 20%-40% of Voices Matters

When a statistically significant portion of the workforce isn’t represented, the survey results can be misleading. Important issues might be overlooked, and the firm might make decisions based on incomplete data. This misstep can prevent addressing critical concerns and hinder the firm’s ability to make informed choices.

How to Get More Employees to Participate

To get a clearer picture of what everyone in the firm is thinking, you need to boost participation rates. Here are some strategies that can help:

1. Explain the why. Clearly communicate why the survey is important and how the feedback will be used. Share examples of past changes made because of survey results.

2. Guarantee anonymity. Assure employees that their responses are anonymous. This can ease fears about retaliation or negative consequences for being honest.

3. Don’t go back on your word. If you say it’s anonymous, don’t try to guess who said what to try and address an issue one-on-one based on your hunch. You could create a disaster.

4. Make it simple. Keep the survey short and straightforward. A user-friendly, quick survey is more likely to get completed. Make it accessible on multiple devices.

5. Choose the right time. Avoid busy periods when scheduling surveys. Pick a time when employees can give thoughtful responses without feeling rushed.

6. Act on feedback. Show that the firm values input by acting on the feedback received. Communicate the changes and improvements made as a result of the survey to build trust and demonstrate a commitment to improvement.

7. Engage leaders. Have senior leaders promote the survey and participate themselves. Their involvement can underscore its importance and encourage employees to engage.

The insights gained from employee surveys can drive positive change and strategic growth. However, the challenge of incomplete participation needs to be addressed to ensure that feedback truly represents the entire workforce. By understanding why some employees don’t participate and implementing strategies to increase engagement, AE firms can capture a more accurate picture of employee sentiment. This way, they can better address concerns, foster a positive work environment, and make informed decisions that benefit both the firm and its employees.

Thoughts on how to boost employee survey participation? Text Mark Goodale at 508.254.3914 or email [email protected].

Market Snapshot: Second-Quarter Construction Spending

Construction spending is trending towards a 6% increase from last year’s total based on June’s seasonally adjusted annual rate, as reported by the U.S Census Bureau. Data center construction is more than 62% higher, and manufacturing project activity is up 19%. The single-family market continued its gradual recovery and is up by nearly 10% from levels in June 2023. At the end of the second quarter, however, overall spending growth slowed, mainly driven by nonresidential markets.

Construction Spending Percentage Change – June 2024 vs. June 2023 (Seasonally Adjusted Rate)

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

Weekly M&A Round Up

We have now advised on 250 transactions for our clients: We were privileged to serve as advisors on both of last week’s featured deals. We have now reached the unparalleled milestone of advising on 250 successfully closed transactions for our clients. We would like to congratulate and thank all our clients over the years for the opportunity to serve them and for their trust in us.  

Six other domestic deals announced: Last week, we also reported other domestic deals in TX, MO, OH, TN, NJ, and MA and one global transaction in Spain. You can check all the week’s M&A news here.