Even as deal making elsewhere remains subdued, merger and acquisition activity amongst architecture and engineering firms in the United States is running at near five-year highs as increasing economic confidence and an ongoing shale gas boom prompt firms to join forces and scale up, new analysis shows.
Unveiling its semi-annual count of sales of architecture and engineering firms, Massachusetts-based management consultancy Morrissey Goodale have reported that deal making activity amongst major developed western economies outside the United States remained relatively subdued. Only 43 such sales took place in the first six months of this year as opposed to 54 in the same period in 2013.
With 101 deals having being struck within the United States (just two fewer than the 103 in the same period last year and far higher than any other number that occurred in the same period in earlier recent years), however, the consultancy says the pace of M&A activity among architecture and engineering practices within that country is on target to exceed last year’s total of 178 and come in at between 180 and 200.
Leading the way is the oil sector, where a desire to capitalise on a boom in domestic production and transportation of fossil fuels in places such as Texas, Pennsylvania, Ohio, Colorado, and North Dakota saw a slew of deals. One of the largest of these involved defence contractor Hungtington Ingalls Industries gobbling up energy sector engineering and procurement outfit Universal Pegasus in an effort to enter the oil and gas sector.
Not surprisingly, therefore, Texas was the main hub for deals (16), followed by California (12) and Colorado (7).
Furthermore, large ‘megadeals’ have largely returned to the US market.
Earlier this month, global architecture, engineering and construction services giant AECOM grabbed engineering and construction outfit URS in a mammoth deal which is set to create a $19 billion (annual turnover) behemoth with a global workforce of 95,000.
Other deals involving American firms announced so far this year include the takeover of 14,000-person Foster Wheeler by British engineering outfit AMEC in February and Australian giant GHD’s tie-up with Conestoga-Rovers announced in March.
In a statement, Morrissey said M&A activity within the United States has been gathering momentum as the economy has gradually recovered.
“The pace of domestic A/E industry consolidation, which accelerated coming out of the great recession in 2011 and carried forward into 2013, has remained relatively steady into 2014,” the firm said. “Industry firms appear to remain cautiously optimistic, with deal activity in 2014 on pace to rise to levels similar to 2012 and 2013 by year end. Firms continue to make bets on the positive economic climate in the US.”
“The question will be whether this momentum continues into the back half of the year, as firms work to integrate recent acquisitions and continue to assess the U.S. market.”
Outside the United States, the United Kingdom saw the most deals followed by Canada and Australia.