Word on the Street: Issue 215

Announcing the 2024 Best Post-Transaction Performance Awards Recipients

Introduction and context: The 2024 Best Post-Transaction Performance Awards will be presented at the Texas and the South M&A and Business Symposium in Houston in a few weeks. These are the third of the three annual awards in our Excellence in Acquisitive Growth Awards series designed to recognize the most accomplished acquirers in the AE and environmental industry. The Best Post-Transaction Performance Awards specifically recognize those acquirers that have delivered the most meaningful positive business impacts through their acquisitions.

We created the Awards series for two reasons. First, to recognize those acquirers that are leading the way in improving how consolidation happens in our industry. Second, as a way to share best practices so that collectively the industry achieves better outcomes from M&A in terms of client satisfaction, employee engagement, and value for investors.

Industry consolidation continues at a transformational pace of over 450 transactions a year. So, it’s in the best interests of all industry stakeholders—project owners and firm shareholders, managers, and employees—that consolidation takes place in an excellent manner, creating greater value, more reliability in operations, enhanced client service, and improved resource allocation.

Performance defined: This Award establishes the only industry objective benchmark to assess post-transaction performance—the Acquisition Performance Indicator (API). The API takes a holistic view of an acquisition—it does not focus just on financial indicators. Rather, it assesses performance in the areas of revenue, profit, backlog, and voluntary turnover in the 12 months following the date of a transaction. The revenue and profit elements indicate top- and bottom-line improvements—and speak to return on investment. The backlog element is an indicator of sales and marketing improvements. The voluntary turnover element reflects improvements in employee engagement and a direct reflection of integration success. 

Ideally, acquirers seek to achieve a positive API with each acquisition. And in a perfect world, each contributing factor (revenues, profits, backlog, and voluntary turnover) would show a positive result. However, for the second year in a row, only half of the applications for the Award logged positive outcomes in each of the four contributing factors. This goes to show just how difficult it is to get everything pointed in the right direction in the first year post-transaction.

We would like to thank all of the firms that submitted applications for this year’s Award, and we recognize them for their pursuit of excellence in acquisitive growth. Their intentional commitment to improved performance will result in better outcomes for project owners, firm shareholders, managers, and employees. 

The 2024 Award recipients: This Award has three different size categories, recognizing the meaningful variations that exist in the post-transaction performance environments for large, medium, and small acquisitions. The first size category is for acquisitions of over $50 million in revenue, the second is for acquisitions of between $10 and $50 million, and the third is for acquisitions up to $10 million. The Award recipients in each size category are as follows:

• $50 million-plus: The Award recipient in this category is Tetra Tech (Pasadena, CA) (ENR #3) for its January 2023 acquisition of the UK’s RPS Group. Tetra Tech is one of the industry’s most accomplished acquirers, having made 57 acquisitions domestically and overseas since 2007. Last year’s Award recipient in this category was TRC (Windsor, CT) (ENR #16). 
• $10 million to $50 million: Tetra Tech is also the Award recipient in this category for its July 2019 acquisition of another UK firm, WYG. Of Tetra Tech’s 57 acquisitions since 2007, 18 have been overseas. Last year’s Award recipient in this size category was Salas O’Brien (Irvine, CA) (ENR #39).
• Less than $10 million: The Award recipient in this category is 100% employee-owned KCI Technologies (Sparks, MD) (ENR #56) for its July 2020 acquisition of Hulsey McCormick & Wallace (HMW), headquartered in South Carolina. KCI has made 20 acquisitions in the United States since 2008. Last year’s Award recipient in this size category was Englobe (Montreal, Canada).

We congratulate the corporate development and integration teams at both Tetra Tech and KCI for their commitment to excellence in acquisitive growth. In recognition, Morrissey Goodale will be making a $1,000 donation to an AE industry-related 501(c)(3) organization to be chosen by each of the firms. 

In next week’s Word on the Street, we’ll be reporting the lessons learned from the cumulative dataset of 2024 Best Post-Transaction Performance Awards applications. 

Connections and sharing best practices: You can network with and discuss M&A best practices with corporate development and integration executives from Tetra Tech, KCI, and other Excellence in Acquisitive Growth Awards recipients at the Texas and the South M&A and Business Symposium in Houston on October 16-18. 

To contact Mick Morrissey, you can email him at [email protected] or call/text at 508.380.1868.

Collaboration? Ha!

The Dirty Truth Behind AE Firm Silos and Turf Wars

Literally every firm I do strategy work with says collaboration is a core value. But when I pull back the curtain, all too often I discover anything but teamwork. Instead, it’s welcome to the land of silos, turf wars, and “I’ve-got-mine” cultures.

So, what’s really happening? Why are so many AE firms waving the collaboration flag while their teams are quietly building walls between themselves, hoarding resources, and avoiding genuine teamwork like it’s politics at the in-laws’ dinner table? Let’s take a look:

The anatomy of silos—what do they look like?

Silos in AE firms can take many forms, but they’re all toxic. Here are just a handful:

1. Department silos: The architects are doing their thing, the structural engineers are off in their corner, and neither knows—nor cares—what the mechanical/electrical group is up to. Ever tried getting departments to turn “your work” and “my work” into “our work”? Good luck. It’s like asking Bill Belichick and Tom Brady to co-author a book.
2. Office silos: If your firm has multiple offices that act like silos, you might as well be running completely separate companies. Each office operates independently, with no incentive to share best practices or, heaven forbid, clients or client opportunities.
3. Market silos: When market silos exist inside a firm, asking one sector to help out another isn’t even an option. And the market sector leaders? They guard their client lists like state secrets.
4. Generational silos: In firms with generational silos, the younger staff are usually described as “unwilling to work hard” or “entitled” by older employees, while those older employees are seen as “stubborn” or “resistant to change.” Instead of recognizing the strengths each generation brings, these stereotypes fuel mistrust and prevent true collaboration. The older team might see the younger employees’ flexible approach as a lack of discipline or engagement, while the younger staff view the veterans’ adherence to old-school values as unnecessary rigidity. Both groups retreat into their corners, convinced that the other just doesn’t “get it.”

How silos hurt 

So, what’s the big deal, right? Just let everyone stay in their lane, do their thing, and the firm will hum along smoothly. Well, that’s just flat-out wrong. Here’s how silos can quietly (and sometimes not-so-quietly) dismantle the potential of your firm:

• Wasted time and redundancy: Instead of pooling resources, siloed teams waste time solving the same problems over and over. How many hours have been burned by multiple teams reinventing the same wheel? No one’s talking and no one’s listening, so no one knows.
• Missed opportunities: That project your commercial team nailed could have been a killer portfolio piece to help your health care team win its next big contract. Too bad they never even heard about it.
• Unhealthy competition: Rather than a firm-wide mentality of “we all win together,” silos create a hyper-competitive atmosphere where each department or office is focused on beating the other, sometimes even at the expense of the firm’s greater success.
• Damaged client experience: When silos reign, clients are left navigating your fragmented firm where no one seems to communicate. Good luck getting an integrated, seamless experience when each team has different goals.
• Lowered morale and engagement: Silos create a sense of isolation and competition, which can lead to frustration and resentment among employees. When teams feel disconnected from the broader mission or isolated from their peers, morale drops, and engagement follows, leading to higher turnover and burnout. No one wants to feel like they’re working in a vacuum or on an “inferior team.”

Why silos develop in the first place

Silos don’t appear out of thin air. They’re cultivated by various forces, often unintentionally, but damaging all the same. Here’s why:

1. Leadership blind spots: Leaders love to champion collaboration, but if they’re not actively tearing down walls and encouraging cross-discipline teamwork, they’re just managing silos. And most don’t even know they’re doing it.
2. Incentive structures: When teams are incentivized to hit individual targets (and not firm-wide goals), you’re creating a breeding ground for silos. It’s a classic case of “me first” vs. “us first.”
3. Lack of communication systems: No proper channels for regular, cross-team communication? Get ready for information hoarding and mistrust. If there’s no mechanism to share knowledge, you’ve given teams permission to keep it to themselves.
4. Fear: Teams sometimes retreat into their silos because of fear—fear of looking incompetent, fear of being criticized, or fear of stepping on someone else’s toes. Staying isolated feels “safer” than taking risks and collaborating.

Tearing down the walls—what you can do

Enough with the collaboration slogans and well-meaning, but ultimately toothless, public service announcements like, “We’ve just got to do a better job at [fill-in-the-blank].” You need real actions to bulldoze silos.

1. Incentivize cross-discipline wins: Want collaboration? Celebrate and appreciate it. Create incentives where departments, markets, or offices win only when they work together. Bonuses, promotions, or even public recognition should come when teams share knowledge, co-pitch projects, or combine their strengths.
2. Break down geographical and disciplinary barriers: Regular cross-office meetings, joint project teams, and firm-wide forums can break down those “us vs. them” attitudes. Instead of regional isolation, make every office feel like an extension of the whole.
3. Create cross-market task forces: Put teams from different markets together and give them a shared problem to solve. Get health care folks working with education, commercial with residential. It forces people out of their silos and sparks ideas that could never happen in isolation.
4. Encourage radical transparency: Make information flow freely—across offices, disciplines, and markets. Create systems that make knowledge-sharing easy, whether it’s an internal app or regular company-wide presentations.
5. Model collaborative behavior: Walk the talk. If you are seen collaborating with others, inviting input across teams, and openly sharing information, it sets the tone for the rest of the firm.

So, how do you tear down silos? If you just hesitated, chances are you’ve got some walls to demolish.

Dealing with silos? Call Mark Goodale at 508.254.3914 or email [email protected].

Market Snapshot: GDP Update

Last week, the U.S. Bureau of Economic Analysis (BEA) released its third estimate of real GDP (adjusted for inflation) in the second quarter of 2024. We gathered a few insights:

Growth from the first quarter:

• The Rocky Mountain (Colorado, Idaho, Montana, Utah, and Wyoming) and Great Lakes (Illinois, Indiana, Michigan, Ohio, and Wisconsin) regions had the highest real GDP percentage change compared to the first quarter (annualized).
• At the state level, GDP in Idaho, Kansas, Nebraska, Utah, and South Carolina improved the most (in percentage terms).
• Percentage growth in the construction industry was the highest in Louisiana, Missouri, Washington, Alabama, and Ohio.

Growth since 2019:

• The Southwest (Arizona, New Mexico, Oklahoma, and Texas) and Rocky Mountain regions had the highest percentage GDP growth since the first quarter of 2019.
• At the state level, the highest growth rates since 2019 were in Florida, Idaho, Arizona, Utah, and Texas.
• The construction sector grew the fastest in Idaho, Arizona, Utah, Montana, and Tennessee during the period.

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

Five domestic deals announced across the country: Last week we reported five domestic deals in NE, CO, MN, MA, and FL, including the recapitalization of architecture, engineering, planning, and interior design firm LEO A DALY (Omaha, NE) (ENR #191) by private investment firm Hennick & Company (Toronto, Canada). You can check all the week’s M&A news here.