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This month’s issue of the monthly executive brief providing M&A market insight for C-level management and their professional advisors.
Firms in architecture, engineering, and environmental consulting (A/E industry) are a breed all their own.
M&A outlook. Private equity firms continue to express interest in the A/E sector, either with “platform” opportunities or bolt-on deals. So far, 2014 has been a mixed bag on overall A/E M&A activity. However, there have been more “mega combinations” announced of larger global and national A/E organizations joining forces for size and breadth. The number has decreased, but the scale has been more sizable than last year.
Latest transaction data. The latest version of an ongoing study examines over 200 actual stock transactions in the A/E industry. These include transactions by and between employee-owners (including redemptions of stock by the company and the sale of newly issued stock from treasury), employee stock ownership plan (ESOP) transactions, and mergers/acquisitions. The stock transaction data are in three distinct groups: (1) minority interests in privately held firms; (2) minority interests in publicly traded firms; and (3) controlling interests in privately held firms.
The study includes valuation multiples that represent transactions of minority interests in privately held stock over the last three years. It reveals that there is a fair degree of consistency in valuation multiples between the various types of firms responding to the survey. For example, the median enterprise value as a multiple of earnings before interest, taxes, and owners’ bonuses were: 4.43x for architecture and A/E firms, 5.14x for environmental consulting firms and 5.65x for engineering and E/A firms, with a median for awaste disposal. According to First Research, the Canadian business services sector consists of about 100,000 companies with combined annual sales of more than $40ll firms surveyed of 5.35x (see Exhibit 1 above).
Article by Homeric Arvanitis, BComm, ASA-BV
For more information contact:
Douglas Nix, CPA, CA | Vice Chairman CFA
905 845 4340 ext. 211