Word on the Street: Issue 223

We hope all our readers have a wonderful Thanksgiving. The next Word on the Street will hit the street on Monday, December 9^th.

Shakeup in the Southeast

When it comes to industry M&A in the Southeast U.S., Florida is always the big kahuna. Indeed, Florida has been—on and off over the past few years—one of the three most-active states for deal-making in the entire country along with Texas and California. (Year-to-date, Texas has seen the most consolidation with 42 firm sales, Florida is next with 39 deals, and California is third with 37.)

Annually, the five states comprising the Southeast (FL, GA, NC, SC, and AL) play a relatively outsized role in the national consolidation picture—accounting for just under one-fifth of all transactions nationally. Such is the demand by both out-of-region U.S. firms and overseas firms to enter the very attractive market. And while once again this year Florida will see the most deals of any state in the Southeast, change is afoot…

1. Correction in the Sunshine State. Floridian consolidation is way off the pace of the prior couple of years. In 2022, there were 56 deals in the state. And in 2023, that number was a robust 52. This year, we’re forecasting a deal count of—at best—low- to mid-40s. The most recent transaction announced in the state was that of Palm Harbor’s Avid Group® by leading Southeast firm McAdams (Raleigh, NC) (ENR #262). (Morrissey Goodale advised McAdams on the transaction.) Why the slowdown? There are two primary reasons. And neither are due to a market slowdown. Rather, the first reason is hurricanes. Among them, Debby, Helene, and Milton (really, Milton??) caused enough business disruption and distracted more than a few Florida leadership teams from closing deals that they had in the works—in some cases by 90-plus days. So, we can expect an uptick in Q1 2025 as those deferred closings come to fruition. A second contributing factor—one that we are hearing on the street—is that non-private equity (PE)-backed acquirers feel that they cannot compete for acquisitions in Florida against the PE-backed players. So, this year they have been pursuing transactions in other Southeast states (see below), thereby reducing demand for firms in Florida. For these two reasons, consolidation in the Sunshine State resembles the state of affairs pre-pandemic when the average annual deal count was high-30s to mid-40s. 

2. Trending strong in the Tar Heel State. There’s zero sign of a slowdown in North Carolina consolidation. We’ve already seen 16 transactions this year, well ahead of the full-year deal count of 10 in 2023 and approaching the super-hot pace of 18 deals in 2022. Perhaps the most notable transaction in the state this year was the acquisition of prominent Southeast regional firm WK Dickson (Charlotte, NC) (ENR #373) by industry leader Ardurra Group (Miami, FL) (ENR #84). (We will have a special panel discussion on this truly 1+1=3 merger featuring the CEOs of both firms at the Southeast M&A and Business Symposium in Miami this March.) 

3. Georgia on my mind. For observers of strong and diverse economies, it should come as no surprise that deals in Georgia are up year-over-year. But double!? Yes, the 14 transactions that have taken place in the first 11 months of this year in the Empire State of the South are double the entire deal count of last year. The most recent acquisition announced in the state was that of Peoples & Quigley (Sandy Springs, GA) by DCCM (Houston, TX) (ENR #130).

4. “Now Muscle Shoals has got the Swampers.” And Alabama is seeing an uptick in consolidation. The most recent transaction in the Yellowhammer State was announced last month when 100-employee Gonzalez-Strength & Associates, Inc. (Birmingham, AL) sold to LJA Engineering, Inc. (Houston, TX) (ENR #67). Year-to-date there have been five deals announced in the state, up from three for the entirety of 2023.

5. Positively palmetto. Along with Florida, South Carolina is experiencing a slowdown in M&A activity this year. There have been six deal announcements through mid-November, compared with a full-year deal count of 10 in 2023. Notable among the consolidation in the state this year was the sale of 55-employee Insight Group (North Charleston, SC) to RMA Companies (Rancho Cucamonga, CA) (ENR #112). (Morrissey Goodale initiated the transaction and advised Insight Group.) 

While the Southeast will once again represent about one-fifth of all deals in the U.S. this year, the allocation of transactions among states will be different than in the past. 

The 2025 Southeast M&A and Business Symposium in the Mandarin Oriental in sunny Miami this March 12 through 14 is the #1 venue for AE industry buyers, sellers, and investors to connect. Journey to one of the most exciting cities in the country this March to join over 200 AE industry executives, investors, and experts to get a “first read” of how the industry is performing in 2025 and where it’s headed, to learn how industry M&A and valuations are playing out in the new year, and to do some power networking to help take your firm to the next level. Register today at the early-bird rate to reserve your place. 

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

Thank the Pilgrims for These Eight Lessons

As Thanksgiving nears, you may be reminded of the Pilgrims’ famous 1620 journey on the Mayflower and their harrowing first year in the New World. And while the Pilgrims’ experiences seem a world apart from the day-to-day at a modern AE firm, they offer up some timeless lessons in resilience, leadership, and adaptability.

The Pilgrims landed in Plymouth, Massachusetts, in December, with a brutal winter already closing in. Starvation, illness, and the bitter cold decimated the group, with more than half of the would-be colony dying in the first year. But despite all odds, a hardy few survived, grew, and built a foundation that would eventually support generations. So, what can you take away from these early settlers? Here are some “Pilgrim Principles” to help you brave your own New World.

1. Prepare relentlessly but expect the unexpected

The Pilgrims didn’t arrive entirely unprepared. They had a plan, provisions, and strong ideals. But their new environment threw every imaginable curveball at them. Sound familiar? Just like the Pilgrims, you can’t anticipate every twist and turn. But strategic preparation and a mindset ready to adapt can make all the difference.

Even the best-laid plans can go sideways. So, create a foundation that can bend without breaking. Equip your team with resources, encourage flexibility, and cultivate the habit of regularly reviewing your strategies. The Pilgrims didn’t have a plan for an early frost or dwindling rations, but they learned to adapt. Encourage your team to adapt in real time as well. If a project encounters a significant obstacle, encourage leaders to shift focus from “how did this happen” to “what’s the next best step?” Then attack the issue (not the individual).

2. Don’t be too proud to seek help

The Pilgrims quickly realized they would need help if they were to survive. By forming alliances with the Wampanoag people, they learned about local crops, hunting techniques, and survival skills.

In the AE industry, we often view ourselves as self-sufficient problem-solvers. But forming partnerships and seeking knowledge outside of our disciplines is essential (think professional network, clients, and even competitors). When you lack experience or when resources get tight, look for strategic partnerships that offer mutual benefits.

3. Foster a resilient culture

For the Pilgrims, community was the cornerstone of resilience. When things were at their bleakest, they relied on one another. Those who were able to work shared the load, cared for the sick, and supported those who were struggling.

At the heart of every great AE firm I’ve ever worked with is its culture, which is critical for survival when times get tough. Fostering a resilient culture means creating an environment where people support each other, share responsibility, and are encouraged to bring solutions. Build that environment by encouraging open feedback, checking in on morale, and celebrating successes—even the small ones.

4. Make tough decisions for the greater good

That first winter, the Pilgrims had to make gut-wrenching decisions about resource allocation and labor. It wasn’t about individual wants or comfort but about survival and what was best for the group.

Running an AE firm isn’t about survival in the literal sense, but in a fiercely competitive market, making difficult decisions is part of your job. Sometimes that means letting go of a legacy service that no longer adds value or redirecting resources to a market with more growth potential. These choices are never easy, but they are essential.

5. Innovate with what you have

The Pilgrims didn’t have much, but they made the most of their limited tools, applying creativity and ingenuity to every task. Whether it was learning to fish or experimenting with new ways to build shelters, they used what they had to make do.

Innovation isn’t always about groundbreaking new technology. Sometimes, it’s about using what’s on hand in fresh ways. If your firm is facing budget constraints, think about making incremental improvements to workflows or investing in process-automation tools. Or, if talent is in short supply, consider cross-training staff to cover multiple roles, increasing staff “liquidity.” Regardless, use what you have to its fullest potential to take better care of your clients and your company.

6. Be patient and persistent

The Pilgrims knew they wouldn’t see the fruits of their labor overnight. They were building a future that would take years, possibly even generations, to realize. Despite overwhelming hardships, they stayed the course.

In the AE world, sustainable growth, reputation, and strong client relationships take time, patience, and persistence. Even when your firm faces setbacks, keep the long-term goals in mind and trust the process. Create a culture of long-term thinking by aligning teams around shared goals and encouraging them to persevere when progress feels slow. Stay committed to the vision, even in the worst weather.

7. Make gratitude a core principle

When the Pilgrims finally harvested their first crops, they celebrated Thanksgiving. It was a moment to reflect, honor the struggles they had overcome, and express gratitude. They acknowledged the generosity of the Native Americans who had helped them survive and celebrated their own resilience.

On most days, you might struggle just to find enough time to put down a decent meal or two. So, pausing to say “thank you” can seem like a luxury. (We’re much better at criticizing, anyway.) But gratitude builds resilience, loyalty, and a positive workplace culture. When teams feel appreciated, they tend to invest in the work and in each other. Celebrate your firm’s achievements, whether that’s landing a big project or surviving a challenging year. And take a moment to thank the people who make your success possible—clients, partners, and especially your employees.

8. Plan for future generations

The Pilgrims may not have been thinking of themselves as “founders,” but that’s exactly what they were. They were laying the groundwork for future generations, often at great personal sacrifice.

It’s easy to get wrapped up in the daily grind and forget the big picture, but think about the legacy you want your firm to leave behind. Weave your most important values into every decision, every project, and every hire because they will define your firm’s place in the future.

As we celebrate Thanksgiving this week, take a moment to think about the Pilgrims and the grit it took for them to survive and eventually thrive. Today, we face our own set of New World challenges—labor shortages, economic uncertainty, industry disruptions, and the list goes on. Yet, just like the Pilgrims, we have the opportunity to innovate, collaborate, grow, and ultimately succeed.

A note about the author: Mark Goodale is a direct descendant of Mayflower crew member John Alden, though he has no particular affinity for cask-making and most certainly lacks the requisite skills. Nevertheless, he can be reached at 508.254.3914 or [email protected]. 

Market Snapshot: Architecture Demand

The October Architecture Billings Index (ABI) report published by the American Institute of Architects (AIA) brought positive news to the industry after almost two years of sluggish activity. The ABI was slightly above 50, reflecting a 10% improvement from September and an 11% improvement compared to October of last year. Firms also reported a 5% increase in inquiries compared to September. More firms are expecting revenue growth in 2024 and 2025, in large part due to the improved outlook on inflation, interest rates, and the lending environment.

Despite the month-over-month improvement in billings and inquiries, there was a decline in newly signed contracts. Election uncertainty and expectations of additional rate cuts by the Fed may have contributed to projects being pushed further into 2025. Nonetheless, given the latest trends, the architecture industry seems a bit more confident. 

The South region performed the best, while the Northeast was the only one with a month-over-month decline. As it relates to sectors, institutional projects were the only category to show growth, improving 4.3% from September and reaching a 50.5 index.

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

The AE and environmental consulting industry continues to gather pace: With another transaction in the Southeast last week, the consolidation wave in the AE and environmental consulting industry is now up 4% over the past 12 months. Last week, domestic deals were announced in AZ, WA, OH, MN, and MA. Overseas, we reported transactions in the UK, UAE, Australia, and Finland. You can check all the week’s M&A news here.