Word on the Street: Issue 293

A Manifesto for the AE Industry (Part 1)

This is the first of a three-part series (yup, another trilogy) in which our team sets out our assessment of where the AE industry is today and where it’s headed. This manifesto is informed by what we’re learning through all of our strategy and advisory work for clients around the country and overseas; by our ongoing conversations with buyers, sellers, and financial sponsors in our M&A practice; and in conversations with the hundreds of CEOs and investors who joined us at our symposiums in Miami and Dallas earlier this year.

This first installment provides our perspective on the broad State of the Industry—its performance, the trends shaping it, and what’s next. Next week, Part 2 will focus on Industry Consolidation and Capitalization. And the third installment will be dedicated entirely to Artificial Intelligence.

So, let’s start with the headline. The industry is strong and stable. But the narrative under the fold (reference explanation for those readers born after 2000) is noisier, more nuanced, and frankly more cautious than it was a year ago.

Where we are today:

• We are in our 14^th year of industry expansion, with performance still at or near record levels. This last decade-and-a-half has been a Golden Age for the AE industry. But it looks very different today compared with 14 years ago (thanks in no small part to the interest on the part of private equity, proliferation of a post-pandemic hybrid work model, and of course our newest best friend, Claude).
• Firm financials are at or near all-time highs, particularly among larger and more diversified firms—strong profit margins, healthy balance sheets, and low debt.
• Backlogs remain elevated, with a median near 11 months, though levels are stabilizing or moderating in some segments.
• Firms continue to face constraints in experienced mid-level talent, which remains a key operational bottleneck.
• Leadership transition is accelerating, and CEOs who have been in the seat for 20 or more years are leaving in record numbers. Since 2023, two-thirds of the industry’s publicly traded firms have announced CEO changes. Half of the industry’s largest privately held firms have turned over their CEOs since 2024. It’s a massive changing of the guard (and de-graying) at the top. 
• Optimism is up from 2025; most CEOs expect revenue and profit to grow. (“Expect” in business lingo is the first cousin of “hope.” Neither is a strategy. As Mark Goodale wrote last week in “9 Reasons Why Some Strategic Plans Change Firms and Others Change Nothing,” our ENR 500 strategy clients who collectively improved a net total of 214 positions over the past three years on the Top 500 list know a thing or two about how to take “expectations” and turn them into reality.)

Our outlook—The next 12 months:

• Growth continues but moderates toward high single digits.
• From an infrastructure perspective the energy, utilities, and water markets will remain the strongest; data centers remain strong but will moderate somewhat.
• Regionally, the South writ large will continue to provide superior growth opportunities for AE firms of all types (infrastructure follows population). Texas, Florida, and states in between will continue to see elevated levels of consolidation. 
• Private capital will increasingly fill public infrastructure gaps as federal funding remains uncertain.
• In the C-suite there is a greater focus on margin discipline as growth moderates. (CFOs and COOs are back!)
• There is increased selectivity in clients, markets, and project types.
• There is continued pressure to grow revenue without proportional increases in headcount (thanks again, Claude).
• We expect a record number of CEO transitions in the industry this year.

And over the next five years:

• Megatrends drive sustained investment: aging infrastructure, grid modernization, water stress, AI, smart buildings, affordable housing, and data centers.
• The generational leadership shift reshapes firms, with increased focus on tech investments, growth, risk-taking, and deal-making.
• Decoupling revenue growth from headcount will become the central strategic challenge (and opportunity).
• Demographic and climate pressures will drive firms toward new, solution-based markets.

The industry is as strong as it’s ever been and yet stands at an important inflection point. The Golden Age isn’t over, but the rules that governed it at its beginning have been torn up and thrown out and are being rewritten in real time—by AE industry leaders, investors, and AI agents. Next week, in Part 2, we turn to one of the major forces reshaping the industry in real time: consolidation and (re)capitalization. 

If your job has to do with consolidation and recapitalization, then make sure you connect with over 140 AE industry CEOs, corporate development executives, investors, and experts at The M&A and Capitalization Symposium in Houston this October. Not only will you get to network with the largest gathering of industry deal-makers and investors in one of the nation’s fastest-growing cities, but you’ll also get to meet the recipients of this year’s M&A Best Practices Award and Best Post-Transaction Performance Award. Save big through July 31 with early-bird registration. 

Correction for Omission

Two weeks ago we checked in on This Year’s Movers and Shakers. However, when we previewed the contenders for 2027, we inadvertently omitted one of this year’s most active industry acquirers (and 2023 recipient of the Most Proficient and Prolific Acquirer Award) IMEG Corp. (Rock Island, IL) (ENR #51). (Sorry to all of our friends at IMEG!) 

It’s an oversight we regret because the numbers tell a compelling story. With eight acquisitions already announced in 2026, IMEG is not just a contender for the 2027 Movers and Shakers list, it is the most acquisitive AE firm in the country this year, outpacing every firm currently on the list. In January, IMEG continued its strategic growth in the Southeast with the acquisition of Buford Goff & Associates (Columbia, SC), a multidisciplinary engineering firm specializing in mechanical, electrical, security, and communications services. That same day, it also announced the asset acquisition of CFR Engineering Consultants (Germantown, MD), an MEP firm with expertise in highly technical facilities. In March, the firm added KMCE (Dallas, TX), a firm specializing in subsurface utility engineering and underground infrastructure services. IMEG bookended April with acquisitions, beginning with the The JW Group (Kennett Square, PA), an aviation-focused engineering firm, and Marlin Engineering (Fort Lauderdale, FL), adding its transportation engineering and planning to the firm’s existing MEP and structural services. Keeping momentum, in May, the firm brought on two energy consulting firms: AGM Energy Services (Twinsburg, OH) and Palmer Conservation Consulting (Toledo, OH). Most recently, IMEG in June acquired Rodriguez Transportation Group (Austin, TX), a transportation engineering and planning firm serving government and transportation clients across Texas. That’s 250+ employees added across eight deals in six months—each expanding and/or deepening IMEG’s geographic presence and expertise.

The Lost Art of Positioning as the Expert

As you just read in Mick Morrissey’s insightful article, despite growing uncertainty in some markets, the AE industry remains remarkably healthy. Fourteen years into an expansion cycle, most firms continue to enjoy strong backlogs, healthy profitability, and generally positive expectations for the future.

That observation got me thinking about something that gets relatively little attention. Long periods of prosperity have a way of changing behavior. They encourage firms to focus on execution, recruiting, capacity, acquisitions, leadership transitions, and project delivery. Those priorities are entirely rational. In fact, most leadership teams would be criticized if they weren’t focused on them. The challenge is that some of the disciplines that matter most in competitive markets tend to weaken when markets have remained this strong over a long period of time. One of those disciplines is positioning.

By positioning, I don’t mean logos, taglines, websites, or social media activity. It’s much more fundamental than that. In particular, I mean building a brand as the firm that understands a particular market and its challenges and issues better than anyone else.

For decades, that approach has been one of the most effective growth strategies available to professional services firms and remains so today. Yet it feels as though fewer AE firms are practicing it.

From what I can tell, many firms have mistaken visibility for expertise. A firm can be highly visible and still be largely undifferentiated. It can have an active LinkedIn presence, a polished website, professional photography, attractive proposals, and a steady stream of project announcements. None of those things are bad, but none of them establish expertise.

Expertise is established when clients begin associating a firm with knowledge, judgment, and insight in an area that matters to them. Unfortunately, much of the industry’s marketing output today is focused inward rather than outward. Firms spend most of their time talking about themselves, their projects, their awards, their employees, and their accomplishments. Clients, on the other hand, spend most of their time thinking about their own challenges.

Consider the issues occupying the minds of executives in some of the markets many AE firms serve:

• Hospital capacity, staffing shortages, facility utilization, and capital planning
• Utility reliability, infrastructure replacement, regulatory requirements, resilience, and funding
• Data center power availability, permitting timelines, water supply, labor markets, and speed to market
• Enrollment trends, deferred maintenance, modernization needs, and financial pressures facing colleges and universities
• Grid capacity, generation requirements, transmission investment, and electrification

These challenges are examples of the conversations clients are having every day. They are the issues discussed in boardrooms, executive meetings, budget reviews, and strategic planning sessions. Yet relatively few AE firms are consistently producing information that helps clients understand these challenges and navigate them more effectively. And it’s a big opportunity.

Professional services firms are different from product companies. An AE firm’s product is expertise. Clients are not buying engineering drawings, environmental reports, architectural renderings, or construction documents. They are buying judgment, experience, and the confidence that the people they hire understand the problem and know how to solve it.

One of the most effective ways to build that confidence is to demonstrate expertise before the client hires you. This approach is not a new concept. In fact, it is one of the oldest ideas in professional services marketing. Accounting and law firms figured it out decades ago. Management consulting firms built entire businesses around publishing useful information long before a client engagement ever materialized. They understood that if they consistently helped executives understand risks, opportunities, trends, regulations, markets, and emerging issues, they would eventually be called upon.

For a while, the AE industry was catching on, but many in the industry have reverted to reporting on their own activities. The result is that many firms now sound remarkably similar. Marketing copy, graphic design, and photography changes, but too often the message stays the same.

Innovation, client focus, exceptional people, and excellent service are not differentiators. They are basic expectations. No AE firm I know of gets hired because it says it cares about clients. They get hired because their clients believe they know something valuable. That’s why market-focused thought leadership remains such a powerful, if underutilized, tool.

Notice I said market-focused. The most effective expertise-building efforts are targeted, not broad. A firm serving airports should be helping airport executives understand airport trends. A firm serving utilities should be helping utility leaders understand utility challenges. A firm focused on health care should be helping health care executives understand what is changing in health care. The goal is to help clients make better decisions, not impress them with how much your firm knows.

That distinction is important because many firms approach thought leadership as a marketing exercise rather than an educational one. They produce content designed to showcase their capabilities rather than provide useful information, and their would-be clients immediately recognize the difference.

The best content rarely feels like marketing. Instead, it feels more like education. It answers questions, provides perspective, identifies risks, highlights opportunities, and helps executives better understand their environment. Most importantly, it leaves your target audience feeling somehow better off.

When firms market this way consistently, something interesting happens. Clients begin to associate them with expertise, and over time, they become known for understanding a particular market or issue. The brand begins to extend well beyond any individual project.

Positioning is not complicated, but it does require patience. One reason many firms abandon the effort is because the payoff is rarely immediate. While a project announcement generates instant visibility, an award announcement generates instant engagement, and a ribbon-cutting photograph may generate a few hundred likes on LinkedIn, a thoughtful article on the future of water infrastructure funding, airport capital programs, health care facility utilization, or data center development trends may generate far less immediate activity. Yet six months later, when a client is trying to make a major decision, which touch is more likely to be remembered? The answer is usually obvious.

The most effective expertise-building content tends to focus on topics such as:

• Market outlooks and forecasts
• Funding and regulatory updates
• Emerging risks and opportunities
• Industry benchmarking
• Economic and demographic trends
• Infrastructure investment priorities
• Technology developments affecting clients
• Workforce and labor market challenges
• Lessons learned from major programs and projects

Notice that none of these topics are primarily about the firm itself. Instead, they are about the client’s world (it’s called “living in the client’s domain”).

That is where the opportunities exist. To illustrate the point, consider two hypothetical firms.

Firm A publishes:

• Project announcements
• Award announcements
• Employee anniversaries
• Community involvement activities
• Office celebrations

Firm B publishes:

• A quarterly airport market outlook
• Annual capital funding forecasts for water utilities
• Data center development trend reports
• Health care facility benchmarking studies
• Regulatory updates affecting clients

Both firms may be equally capable, perform excellent work, and have talented people and strong client relationships. But if you are a client trying to understand where your market is headed, only one of those firms is helping you answer that question. And over time, that difference becomes meaningful.

One of the great misconceptions in AE marketing is that clients spend most of their time looking for consultants. In reality, they spend most of their time trying to understand their own businesses. They are trying to anticipate risks, allocate resources, identify opportunities, justify investments, and make informed decisions. The firms that help them do those things often earn credibility long before an RFP is issued. And that credibility becomes difficult to dislodge.

I believe that’s why some firms consistently seem to punch above their weight class. They are not necessarily the largest firms with the largest marketing budgets. They are simply known for something and have become associated with expertise in a market that matters to their clients.

As Mick points out in this week’s manifesto, the industry remains strong and growth will continue. But competition for the best opportunities will become increasingly intense.

So, maybe it’s time to take advantage of one of the industry’s most overlooked opportunities.

Weekly M&A Round Up

16 deals mark a balanced week for U.S. and global M&A activity: M&A activity remained steady last week, with 16 total transactions across domestic and international markets. In the U.S., 12 deals took place across WA, OR, IL, ID, MN, WI, CO, MS, TX, and CT, with activity showing strength in the Western and Midwest regions. Internationally, four transactions were reported in the UK, Switzerland, Spain, and Australia. Check out all of the week’s M&A news here.