2025 AEC M&A Outlook Report

The 2025 AEC M&A Outlook Report by Zweig Group and Stambaugh Ness delivers a data-driven view of industry consolidation—who’s buying, who’s selling, and why. Built on proprietary datasets and thousands of real transactions, it reveals the trends shaping valuation, strategy, leadership transition, culture, and capital formation. The most complete resource for firms planning, pursuing, or preparing for M&A.

01 The AEC M&A Landscape

A Current Look at M&A Activity 01

1.1

02 Financial Context

2.1 Growth Narrative

2.2 Profitability Narrative

2.3 Work Mix & Client Mix

2.4 Section Summary

03 Who’s Buying & Who’s Selling

From the Survey

3.1

04 Forces of Change

CONTENTS

4.1 Motivations & Drivers

4.2 Concerns & Challenges

4.3 Valuation Benchmarks

05 Around the Industry

Market Sector Status

5.1

5.2 Geographic Hotspots

06 Outlook & Key Themes

6.1 Short-Term Outlook

6.2 Medium-Term Outlook

6.3 Long-Term Outlook

20%. These factors have transformed the AEC industry into one of the few professional sectors offering both reliability and outsized performance, making it increasingly appealing to investors seeking long-term value creation and growth. Value Creation in Motion: M&A has become more than a pathway to growth. It’s a tool for unlocking and compounding enterprise value. Sustainability at the Core: Environmental and infrastructure-focused firms lead the field, reflecting how M&A has become a means of tackling the world’s biggest challenges: climate resilience, water systems, energy transition, and smarter cities. Culture as Strategy: Integration is about more than systems. It’s about people. The firms that succeed will be those that protect culture, empower leadership, and align purpose with performance. This is not a story of consolidation alone. It’s one of transformation. M&A is redefining what it means to grow, to lead, and to sustain relevance in a market where resilience, culture, and purpose drive performance.

Everywhere you look, the AEC industry is accelerating. Not just in output, but in ambition. M&A has evolved from a growth lever to the operating system of the modern firm. It’s how leadership transitions, capital formation, and long- term strategy now intersect. INTRODUCTION

What’s fueling this transformation is unmistakable:

Enduring Strength: More than 2,700 transactions have taken place since 2021. Growth has become structural, not cyclical. Capital Meets Purpose: Private equity platforms, federal infrastructure funding, and global investment have combined to create a powerful engine for expansion—one driven as much by mission as by money. Performance That Attracts Capital: Firms are continuing to deliver strong fundamentals— recurring revenue, essential services, and consistent pre-bonus returns on equity near

In addition to these proprietary sources, the analysis incorporates national construction and market data from resources like the US Census Bureau to provide broader context on spending trends and sector composition. Together, these sources paint a picture of an industry in motion—financially strong, strategically selective, and increasingly defined by cultural alignment as much as by scale. The result is a market that’s disciplined, confident, and purpose-driven. M&A today is less about chasing growth and more about designing it. The pages ahead reveal not just where deals are happening, but why—and what those decisions say about the future of the AEC industry.

The story of M&A in the AEC industry has entered a new phase. What was once defined by waves of activity has matured into a long-term redefinition of how firms grow, lead, and sustain value. Opportunistic dealmaking has evolved into a disciplined, data-driven strategy for continuity, capability, and competitive strength. This report provides the data, analysis, and context behind that transformation. It offers a research- driven view of who’s buying, who’s selling, and what’s shaping performance, valuation, and strategy across today’s AEC landscape. The question is no longer whether consolidation will continue. The question is how your firm will lead in an era where strategic alignment, operational strength, and return on investment define success for the decade ahead.

It draws on several core Zweig Group datasets:

2025 AEC M&A Outlook Survey 2025 Valuation Survey 2025 Financial Performance Survey 2025 Principals, Partners, and Owners Survey Zweig Group’s M&A Activity Report

The AEC M&A Landscape

A Look at the Current AEC ................................. M&A Landscape 01 The Spectrum of Size .............................................................. 02 Shift Toward Environmental & Infrastructure ..................... Focused Activity 03 The Rise of Private Equity ....................................................... 03 Location, Location, Location ................................................. 04 A Diverse & Evolving Market .................................................. 06

1.1

The AEC M&A Landscape A LOOK AT THE CURRENT AEC M&A LANDSCAPE

Over the past five years, M&A has transformed from an opportunistic tactic to a defining feature of how AEC firms grow, diversify, and tran - sition ownership. There have been over 2,700 transactions in the AEC industry since the start of 2021. For many firms, M&A is now standard practice. Nearly four in ten firms surveyed for this report have completed a merger, acquisition, or re- capitalization in recent years, and many others are exploring strategic partnerships or transition options. Whether driven by growth, succes- sion, or competition for talent, one reality is clear: M&A is no longer the exception. It’s the model for how the modern AEC firm grows.

M&A Activity (Past Three years)

Source: 2025 AEC M&A Outlook Survey, Zweig Group and Stambaugh Ness

2025 AEC M&A Outlook Report

THE SPECTRUM OF SIZE

M&A activity in the AEC industry spans a wide range of firm sizes, but the mix is often misunderstood. On the sell-side, most firms entering the market are small to mid-sized—typically founder-led companies averaging around 30 employees. These firms are commonly acquired by larger regional or national platforms seeking specialization or geo - graphic reach. While high-profile mergers between multi-hundred-per - son or global firms are occurring, they represent a smaller share of total activity. The real center of gravity in AEC M&A remains the steady volume of sellers joining disciplined, scalable buyers.

Transactions by Firm size (2021-2024)

Source: Zweig Group M&A Activity Report

2025 AEC M&A Outlook Report

SHIFT TOWARD ENVIRONMENTAL & INFRASTRUCTURE-FOCUSED ACTIVITY

Deal flow continues to concentrate around infrastructure and environ - mental markets, which reflects national priorities in water, transporta - tion, and energy systems. Environmental firms lead all sectors in 2025, followed closely by civil engineering and architecture. Activity among surveying, MEP, and energy/power firms remains steady, driven by ris - ing demand for climate resilience, geospatial insight, and energy transi- tion expertise. THE RISE OF PRIVATE EQUITY Private equity is now involved in about half of all AEC transactions, which is backed by yet another wave of new investments from different forms of capital. These investors have shifted from experimental market entrants to long-term operators, building regional and sector-focused platforms through serial acquisitions.

2025 Transaction Targets By Sector

Source: Zweig Group M&A Activity Report

2025 AEC M&A Outlook Report

2025 Acquirers By Sector

Source: Zweig Group M&A Activity Report

LOCATION, LOCATION, LOCATION Dealmaking still follows national demographic and economic shifts, but AEC activity remains deeply local. Markets can look entirely different just 75 miles apart, and buyer interest often tracks where people, talent, and long-standing client ties are concentrated. The Southeast and Texas continue to lead in volume and growth, supported by population gains and infrastructure investment. The West Coast remains strong in water and environmental work, while the Midwest and Northeast lean on technical and regulatory expertise shaped by local conditions. Rising inbound interest from Canada, the UK, and Australia adds to momen- tum and reinforces confidence in the long-term value of the US infra - structure market.

2025 AEC M&A Outlook Report

Breakdown of 2025 acquisitions by target region (domestic Transactions)

Source: Zweig Group M&A Activity Report

2025 acquiring firm region (Domestic Transactions)

Source: Zweig Group M&A Activity Report

2025 AEC M&A Outlook Report

A DIVERSE & EVOLVING MARKET The AEC M&A landscape remains broad and balanced. A diverse mix of environmental specialists, regional engineering firms, architecture prac - tices, and private-equity-backed platforms are all advancing within a shared wave of transformation. As 2025 draws to a close, consolidation reflects not a passing trend but an industry growing more integrated, data-driven, and strategically aligned than ever before.

Financial Context 2.1 Growth Narrative ........................................................ 08 Striking a Growth Balance ......................................................... 08 Finding a Path Forward .............................................................. 09 2.2 Profitability Narrative ............................................... 09 Profitability Drives Activity .......................................................... 09 The Result of Rising Profitability ....................................... 10 2.3 Work Mix & Client Mix .............................................. 10 Prime vs. Subconsultant Work ................................................... 11 Public Sector vs. Private Sector ................................................. 12 Balancing Work & Client Work .................................................. 13 2.4 Section Summary ....................................................... 14

Financial Context

Growth Narrative Survey data shows sustained expansion across the AEC industry. Most firms continue to report positive revenue growth, with many achieving double-digit gains. This is evidence of durable momentum despite economic headwinds. 1 According to the US Census Bureau, total construction spending in July 2025 reached a seasonally adjusted rate of $2.13 billion, nearly unchanged from June and only 2.8% below the record level of July 2024. Private construction accounted for $1.62 billion, while public spending totaled $516 billion, led by education, highway, and water infrastructure projects. 2 Growth is increasingly strategic rather than cyclical. Firms are investing in digital delivery, sustainability, and infrastructure-related services that benefit from long-term public funding. This shift suggests that expansion is being driven by structural demand for resilient, adaptive design and engineering solutions. STRIKING A GROWTH BALANCE Mid-sized firms (50-249 employees) continue to stand out. Their balance of efficiency and scale allows them to achieve measurable pricing premiums compared with both smaller and larger peers, reinforcing their role as attractive acquisition platforms. 3 Environmental and infrastructure-focused firms also outperform design-centric practices, reflecting stronger funding pipelines and more consistent long-term demand. 4

1 “Description of Growth (2022-2024).” Zweig Group’s 2025 Valuation Report. Pg 56 2 US Census Bureau, “Monthly Construction Spending”, July 2025: www.census.gov/construction/ c30/pdf/release.pdf 3 “Value Per Employee by Staff Size.” Zweig Group’s 2025 Valuation Report. Page 70. 4 “Value/Net Service Revenue (By Firm Type).” Zweig Group’s 2025 Valuation Report . Page 70.

2025 AEC M&A Outlook Report

FINDING A PATH FORWARD While much of this valuation data reflects internal ownership transition pricing, it still highlights a notable trend—firms demonstrating sustained growth and profitability are commanding higher pricing outcomes, often 10%-20% above slower-growing peers. In today’s market, growth has become both the engine and the reward of M&A activity, signaling confidence in the industry’s capacity to deliver lasting value. 5 Profitability Narrative Profitability continues to strengthen across AEC firms, supported by strong balance sheets and sustained operational discipline. Most firms reported pre-tax, pre-bonus profit margins in the 10%-20% range, with a growing share achieving margins above 20%. Only a small minority operate at minimal profits or losses, which confirms that healthy margins have become the norm rather than the exception. 6 PROFITABILITY DRIVES ACTIVITY Firms in the top profitability quartile remain the most active participants in M&A, both as acquirers and as sought-after targets. Strong margins continue to correlate with greater strategic mobility, as high-performing firms possess the capital capacity to fund expansion and attract investor attention as lower-risk, higher-return opportunities. Mid-sized firms (50-249 employees) stand out as particularly well positioned. Their blend of operational efficiency and organizational scale enables them to achieve premium pricing relative to both smaller and larger peers. 7 These firms strike the balance that buyers and investors increasingly favor—big enough to diversify risk, yet agile enough to integrate effectively—reinforcing their strategic appeal in ongoing consolidation.

5 “Value/EBITDA (By 3-Year Profit Growth).” Zweig Group’s 2025 Valuation Report. Page 77. 6 “Key Financial Statistics (Overall).” Zweig Group’s 2025 Financial Performance Report. Page 30. 7 “EBITDA Margins on NSR (By Staff Size).” Zweig Group’s 2025 Financial Performance Report. Page. 41.

2025 AEC M&A Outlook Report

Environmental and infrastructure-focused firms also outperform design-centric firms in valuation terms, with median value/Net Service Revenue (NSR) ratios ranging from 0.58-0.78, compared to 0.58 or lower for architecture and interiors practices. This reflects stronger funding pipelines and consistent demand in infrastructure and environmental markets, while commercial design work continues to face tighter margins. 8 THE RESULT OF RISING PROFITABILITY Firms reporting above-average profitability are not just earning more. They’re commanding higher valuations. The 2025 Valuation Report shows equity value-to-profit ratios averaging 3.9x. Top performers exceeded 5.0x, particularly among firms with sustained profit growth above 25%. 9 Buyers are increasingly willing to pay EBITDA multiples of 6x or more for firms with profit margins above 20%, recognizing their stability and predictability. Conversely, firms operating below 10% profitability continue to face valuation pressure, often trading closer to 4x EBITDA. The relationship between profitability and valuation has become one of the most consistent predictors of M&A outcomes. Profitability is more than a financial metric. It’s a signal of operational health and cultural resilience that drives buyer confidence and strengthens seller leverage. In today’s AEC market, strong margins, coupled with consistent growth in top line revenue, don’t just sustain firms—they power the deals that reshape the industry’s future. Work Mix & Client Mix Project composition continues to provide stability across the AEC industry. Most firms in the 2025 AEC M&A Outlook Survey report performing the majority of their work as Prime Consultants, underscoring strong client relationships and control over project delivery.

8 “Value by Firm Type.” Zweig Group’s 2025 Valuation Report. Page 92. 9 “Value by 3-Year Profit Growth.” Zweig Group’s 2025 Valuation Report. Page 106.

2025 AEC M&A Outlook Report

According to The Birmingham Group (2024), approximately 78 percent of total US construction spending originates from private investment, while 22 percent comes from public projects. 10 This distribution highlights the industry’s dual foundation: steady institutional and infrastructure work on the public side, and a diverse array of private development in manufacturing, logistics, data centers, and adaptive reuse. Public-sector clients remain the most reliable revenue base, providing multi-year visibility and predictable funding pipelines through federal and state infrastructure programs. Private-sector projects, while smaller in share, continue to drive innovation and margin expansion, particularly for firms diversifying into fast-growing, technology-intensive markets. This balance reflects a resilient model: public work sustaining operational stability, complemented by strategic private projects that enhance profitability, adaptability, and long-term growth. PRIME VS. SUBCONSULTANT WORK On average, firms reported that approximately 70% of their projects are delivered as a prime consultant, with 30% or less performed in a subconsultant role. Larger firms—particularly those exceeding 500 employees—tended to operate at even higher prime percentages, which reflects their broader technical capacity and deeper institutional relationships. Smaller and niche specialty firms continue to serve more frequently as subconsultants. Prime roles allow greater control over fees, schedules, and scope, which can translate to stronger margins and higher valuation multiples. PUBLIC SECTOR VS. PRIVATE SECTOR

10 The Birmingham Group, “Construction Spend Trends: Private vs. Public Projects and What it Means for Job Opportunities” (2024), www.thebirmgroup.com/construction-spend-trends-private- vs-public-projects-and-what-it-means-for-job-opportunities/

2025 AEC M&A Outlook Report

Prime vs. Subcontractor Work

Source: 2025 AEC M&A Outlook Survey, Zweig Group and Stambaugh Ness

Results from the 2025 Valuation Survey indicate that public-sector work accounts for nearly 60% of total revenue for the median firm, with private clients contributing roughly 30% and international clients representing the remaining 10%. Firms with higher public exposure also report more stable backlog pipelines and stronger profitability, reflected in higher valuation multiples. By contrast, firms with a greater share of private-sector work exhibit revenue volatility and tighter profit margins in down cycles. These firms are more sensitive to shifts in financing conditions and real estate markets, particularly in commercial development and corporate interiors sectors.

2025 AEC M&A Outlook Report

Profitability by Public Exposure

Source: 2025 AEC M&A Outlook Survey, Zweig Group and Stambaugh Ness

BALANCING WORK & CLIENT MIX Firms that maintain a balanced mix of public-sector stability and targeted private-sector growth are emerging as some of the most attractive M&A candidates. Practices combining infrastructure, transportation, or water-sector work with private projects in renewable energy, industrial logistics, or data centers show some of the strongest valuation trajectories in the dataset. This blend allows buyers to capture the resilience of public funding when participating in high-growth private markets. As a result, firms with diversified revenue streams, especially those managing a healthy prime-to-subconsultant balance, are positioned to command valuation premiums.

2025 AEC M&A Outlook Report

Growth vs. Client Mix

Source: 2025 AEC M&A Outlook Survey, Zweig Group and Stambaugh Ness

Section summary The AEC industry continues to operate from a position of strength. Most firms report steady revenue growth and healthy margins, translating expansion into sustained financial performance. Profitability near historic highs underscores a disciplined, resilient market. Work composition further reinforces this stability. Public-sector clients and prime consulting roles provide dependable backlog, while selective private-sector projects in things like renewables, infrastructure, and logistics deliver higher returns and growth potential. These dynamics are shaping today’s M&A landscape. High-performing firms with balanced client portfolios and consistent profitability remain the most sought-after targets. Buyers increasingly view margin strength and diversification not just as indicators of health, but as leading signals of long-term value creation. In today’s market, performance, stability, and strategy are the true drivers of valuation.

Who’s Buying & Who’s Selling

From the Survey ............................................................. 16 Sectors Represented ............................................................... 16 Distribution of Firm Ages ........................................................ 18 Distribution of Firm Size & Number of Offices ..................... 19 Firm Ownership & Governance ............................................. 20 A Rich Mix .................................................................................. 22

3.1

Who’s Buying & Who’s Selling

From the Survey The 2025 AEC M&A Landscape Survey paints a clear picture of what’s driving today’s AEC M&A market—and it’s more strategic and diversified than ever. Sectors Represented Respondents to this year’s survey primarily represent architecture and multidisciplinary engineering firms, which together account for just over half of participants. Another 20%-25% of responses come from civil and single-discipline engineering firms, while environmental consulting, planning, surveying, and program management practices round out the dataset. This balance mirrors the composition of the broader AEC market, where firms of every specialty are participating in consolidation at some level.

Firms Surveyed Breakdown (Service Area)

Source: 2025 AEC M&A Outlook Survey, Zweig Group and Stambaugh Ness

2025 AEC M&A Outlook Report

Environmental specialists remain notably active on the sell-side. Nearly two-thirds of environmental firms reported either completing or seriously considering an acquisition within the past three years— underscoring how this segment continues to attract consolidation interest. On the buy-side, multidiscipline and infrastructure-focused firms show the strongest appetite for further acquisitions, with roughly 70% planning to pursue deals within the next one to three years, often to expand geographic reach or diversify services.

2025 M&A Activity By region (Domestic)

Source: Zweig Group M&A Activity Report

2025 AEC M&A Outlook Report

DISTRIBUTION OF FIRM AGES The AEC industry’s M&A landscape continues to reflect something of a middle-aged market. Most active participants are firms founded 25- 50 years ago, which means they’re established enough to have strong client bases and leadership depth yet young enough to pursue growth through acquisition. These firms represent the core of today’s strategic deal activity. Many have completed internal transitions and are now seeking to realize or reinvest the value they’ve built. Younger firms tend to prioritize organic growth and specialization, while the oldest firms tend to focus on succession and ownership continuity through sale or ESOP conversion. Overall, M&A participation remains strongest among firms mature enough to scale but still driven by leaders eager to capture return and reduce transition risk.

Firm Age Distribution

Source: 2025 AEC M&A Outlook Survey, Zweig Group and Stambaugh Ness

2025 AEC M&A Outlook Report

M&A Activity by Firm Age

Source: 2025 AEC M&A Outlook Survey, Zweig Group and Stambaugh Ness

DISTRIBUTION OF FIRM SIZE & NUMBER OF OFFICES Firm size underscores the diversity of the AEC M&A market. The median firm in this year’s survey employs around 125 people, though the dataset includes firms ranging from small niche practices to multinational organizations with more than 6,000 employees. More than 60% of firms fall between 51 and 500 employees. This is the range most frequently involved in transactions, where scale and corporate growth goals can increasingly get accomplished via acquisitive growth. Within this range, firms with 101-250 employees reported the highest likelihood of pursuing acquisitions, while those in the 51-100 employee range are most often identified as attractive acquisition targets.

Geographically, most firms maintain 1-5 offices, with about 20% operating 6-10, and only a handful reporting 50+ locations

2025 AEC M&A Outlook Report

nationwide or globally. The data suggest that regional expansion remains the dominant form of growth, rather than large-scale international diversification.

Firms Surveyed Breakdown (Number of Offices)

Source: 2025 AEC M&A Outlook Survey, Zweig Group and Stambaugh Ness

Firm Ownership & Governance Ownership across the surveyed firms remains largely private, but diversity is increasing as new capital shapes how firms grow and transition. Most firms remain closely held corporations or LLCs, while a growing share operate under ESOP or private equity- backed models.

2025 AEC M&A Outlook Report

ESOP firms tend to show less sell-side activity because they have already solved the ownership transition challenge. Once the ESOP is in place, growth becomes the mandate, which naturally propels these firms as buyers rather than sellers. Private equity platforms, meanwhile, continue to propel much of today’s buy- side momentum with multi-brand strategies focused on long- term value creation and return on investment. Together, these structures reflect a broader evolution in the AEC market. An industry once defined by founders’ names on the door is now attracting new forms of capital and new governance models built around sustainable growth.

Firms Surveyed (Ownership Structure)

Source: 2025 AEC M&A Outlook Survey, Zweig Group and Stambaugh Ness

2025 AEC M&A Outlook Report

A RICH MIX

Today’s AEC M&A market is defined by a rich mix of firm types, sizes, ages, ownership models, and geographic footprints—all contributing to a dynamic, resilient, and strategically motivated era of consolidation. More than anything, this activity reflects a growing focus on value creation. M&A has become an instrument of both strategic growth and wealth building—where invested capital in privately held AEC firms is expected to generate higher and more stable returns than many alternative assets. Rather than chasing scale for its own sake, today’s AEC firms are pursuing alignment—in culture, markets, and mission—reflecting a more disciplined, mature phase of the industry-wide M&A evolution.

Forces of Change 4.1 Motivations & Drivers ................................................ 24 The Sell-Side .................................................................................. 24 The Buy-Side ................................................................................. 25 Size & Geographical Considerations ......................................... 26 Financial Considerations ............................................................. 26 Bringing the Sides Together ........................................................ 27 4.2 Concerns & Challenges ........................................... 28 Quantifying Culture ...................................................................... 28 The Importance of Ownership Transition ................................. 29 Other Considerations .................................................................... 29 The Whole View ............................................................................. 29 4.3 Valuation Benchmarks ............................................. 30 Expectations in Context ............................................................... 30 Evolving Deal Structures ............................................................. 30 Process & Value Protection ......................................................... 31 Valuation: Sector & Geographic Trends .................................... 31 What the Numbers Say ............................................................... 31

Forces of Change

Motivations & Drivers Behind every deal in the AEC industry—behind every dollar, every headline, and every handshake—lies a mix of personal motivations, strategic goals, and cultural intent. The data across Zweig Group’s database paints a consistent picture. Today’s M&A market is defined more by succession and strategy than by distress or speculation. Firms are approaching transactions with clear objectives around continuity, capability building, and long-term value creation. THE SELL-SIDE Succession and ownership transition was by far the primary motivation for considering M&A. It’s position as the leading factor shows that a segment of owners are using transactions to retire, buy out partners, or secure continuity for their firms.

Rated Goals/Objectives for Firm Sale

Source: 2025 AEC M&A Outlook Survey, Zweig Group and Stambaugh Ness

2025 AEC M&A Outlook Report

Another 34% of sellers highlighted employee opportunity and career development, reinforcing that M&A is often viewed as a pathway for staff advancement, not just a financial exit. Fewer than 8% reported financial distress as a motivating factor, underscoring that most sell- side activity is proactive rather than reactive. Ownership demographics support this pattern. Firms 26-50 years old were the most active sellers, and environmental and planning firms were twice as likely as architectural practices to cite leadership transition as a key motivator, reflecting smaller ownership benches and greater succession challenges within these disciplines. THE BUY-SIDE Buyers are entering the market with equally strategic intentions. The 2025 AEC M&A Outlook Survey showed that 62% of acquirers aim to expand geographic reach or service offerings, while 49% are motivated by long-term value creation and diversification.

Rated Goals/Objectives for Acquisition

Source: 2025 AEC M&A Outlook Survey, Zweig Group and Stambaugh Ness

2025 AEC M&A Outlook Report

Cultural and leadership alignment are also gaining importance, with 29% of buyers saying organizational culture significantly influenced their decision to move forward with a deal. This emphasis on fit, integration, and employee retention marks a continued evolution away from volume-driven consolidation toward strategic, people-centered partnerships. SIZE & GEOGRAPHIICAL CONSIDERATIONS Motivations vary by firm size and structure: Large firms (500+ employees) overwhelmingly cited market expansion as their top driver, focusing on regional growth corridors such as the Southeast and Mountain West. These firms accounted for more than one-third of planned acquisitions in the 2025 AEC M&A Outlook dataset. Mid-sized firms (51-250 employees) prioritized service diversification (41%) and access to new talent pools (37%), often acquiring to close capability gaps in specialty markets. Smaller firms (under 50 employees) leaned toward succession planning and cultural alignment, with many seeking mergers of equals or joining employee-owned platforms to ensure continuity. Across all firm sizes, “adding staff” ranked lowest as a motivating factor, which confirms that most buyers target specialized expertise and client relationships, not headcount expansion. FINANCIAL CONSIDERATIONS Financial conditions continue to shape expectations, but they’re not the sole driver. Most sellers expect valuations between 60%-100% of annual net service revenue or roughly 4-6x EBITDA. The 2025 AEC M&A Outlook Survey reveals that firms with profit margins above 20% are nearly three times more likely to expect valuation above 5x EBITDA, while firms below 10% profitability tend to cluster closer to the 3.5-4x range.

2025 AEC M&A Outlook Report

Industry Data: EBITDA vs. Multiple

Source: 2025 AEC M&A Outlook Survey, Zweig Group and Stambaugh Ness & 2025 Zweig Group Valuation Survey

Broader financial context supports this optimism. The 2025 Financial Performance Survey dataset indicates that median AEC firms’ profit margins have risen from 14% in 2023 to 16% in 2025, improving liquidity and giving acquirers greater leverage in financing and deal execution. BRINGING THE SIDES TOGETHER These findings show an industry motivated by continuity, culture, and capability—not crisis. Sellers are seeking to preserve legacy and provide opportunity for the next generation of leaders. Buyers are strategically expanding to diversify services, deepen client relationships, and enhance resilience. In short, both sides are pursuing growth by design rather than necessity, forming a steady, succession-driven market defined by alignment and intentionality.

2025 AEC M&A Outlook Report

Concerns & Challenges What keeps AEC leaders up at night isn’t just the financing. It’s the people. When asked to rank their biggest concerns about M&A, firms in the 2025 AEC M&A Outlook Survey overwhelmingly placed culture clashes and leadership integration at the top of the list—well ahead of worries like valuation, layoffs, or system migration. The data confirms that the human side of a deal is viewed as the most critical determinant of success. QUANTIFYING CULTURE Culture has become a measurable form of business risk. Nearly 58% of respondents to the 2025 AEC M&A Outlook Survey ranked cultural alignment as their single greatest concern in a potential transaction, compared to 19% who named financial risk and 12% who cited technology or operational integration as their top worry.

Rated Concerns Regarding Potential Acquisition

Source: 2025 AEC M&A Outlook Survey, Zweig Group and Stambaugh Ness

2025 AEC M&A Outlook Report

Larger firms (500+ employees) were the most likely to report culture as a primary challenge—two-thirds said post-deal cultural integration poses the greatest risk to achieving expected synergies. Smaller firms (<50 employees) showed similar concern but expressed it in terms of values and leadership philosophy, emphasizing the need for a compatible management approach rather than matching organizational systems. THE IMPORTANCE OF OWNERSHIP TRANSITION When it comes to sell-side priorities, ownership transition and leadership continuity outrank price by a wide margin. In the 2025 AEC M&A Outlook Survey , 72% of sellers said maintaining leadership and firm legacy was more important than achieving maximum valuation. Among firms actively planning ownership transition, two-thirds reported that finding a buyer who will maintain staff and culture was their top priority. OTHER CONSIDERATIONS Operational integration remains a mid-tier challenge, ranking fourth overall among buyer concerns in the 2025 AEC M&A Outlook Survey. For large and multi-office firms, system integration and technology standardization were cited most often—particularly around merging enterprise resource planning (ERP) and HR systems. Leaders noted that systems can be fixed, but cultural damage is harder to reverse, which reinforces that execution risk is perceived as secondary to alignment risk. THE WHOLE VIEW These findings are indicative that M&A in the AEC industry is rarely about dollars and cents alone. Financing and valuation matter, but culture, leadership, and legacy determine whether a deal succeeds. Sellers are focused on continuity and stewardship, while buyers seek alignment and stability that ensure long-term success. Firms are not just looking for a buyer, they’re looking for the right partner. It’s a people-first market, where cultural cohesion is a new currency of value.

2025 AEC M&A Outlook Report

Valuation benchmarks EXPECTATIONS IN CONTEXT

The 2025 AEC M&A Outlook Survey shows a market that’s confident selective. Valuation expectations appear steady overall, yet the gap between what some sellers hope to achieve and what the market will actually bear remains wide in many segments. Deal structures such as earn-out, rollover equity, and growth incentives continue to play a key role in closing that gap and aligning price with performance. Findings from the 2025 Valuation Report highlight how precise buyers have become in identifying value drivers. In competitive processes, top- line offers can very significantly as buyers weigh different assumptions around growth, risk, and taxes—each of which can materially change the outcome for the seller. So while headline valuations may look stable, the real determinant of value is the buyer’s perspective: how they assess risk, how they model future performance, and how they structure the deal to reflect both. EVOLVING DEAL STRUCTURES How value is paid continues to evolve. Cash still anchors most deals, but the 2025 AEC M&A Outlook Survey shows that roughly three- quarters of recent transactions included a contingent or deferred components such as earn-outs, seller notes, or equity rollovers. PE-backed buyers drive much of this activity. More than 60% of their deals tie a portion of value to future performance. ESOP structures look different. Full ESOPs rely more on cash and promissory notes because of regulatory limits and rigid deal mechanics, while minority ESOPs have more flexibility. Taxes also shape these transactions. Section 1042 exchanges remain an important tool for owners, especially in S-corps navigating current tax outlooks. Multiple arbitrage add another layer. Larger firms typically trade a higher multiples, so when an 8x platform acquires a 4x firm, that earning stream is immediately valued at the higher multiple. This built-in lift helps explain why certain deal structures and buyer types dominate the market.

2025 AEC M&A Outlook Report

PROCESS & VALUE PROTECTION Because cultural fit and management transition consistently rank as the two largest concerns for sellers, the deal process itself has become a major determinant of realized value. Formal preparation, particularly highlighting the next leadership tier and documenting integration readiness, helps protect both firm value and culture. Process discipline is increasingly viewed as the ultimate risk-management tool. VALUATION SECTOR & GEOGRAPHIC TRENDS Valuation strength varies widely depending on a firm’s market and service. High-growth areas like environmental consulting, energy transition, and infrastructure development continue to draw strong pricing thanks to steady federal investment and rising private-sector demand. Civil engineering and surveying also remain highly attractive. These disciplines sit upstream of most project types, often opening the door for broader engagements. They’re profitable, consistently needed, and—especially in the case of surveying—challenging to scale, which supports stronger valuations across many markets. Regionally, the Southeast and Texas continue to lead with active pipelines and healthy pricing, fueled by population growth, energy expansion, and supportive business environments. The Midwest and Northeast show solid but steadier activity as economic momentum moves at a slower pace. WHAT THE NUMBERS SAY These findings show that valuation is about more than arithmetic. The numbers set the range, but narrative determines the outcome. Firms with healthy margins, consistent backlog, and a clear story about future growth and leadership continuity consistently outperform peers with similar financial but weaker positioning. Valuation strength in today’s AEC market is earned through performance, justified through strategy, and protected through process. The firms combining all three are the ones realizing the top of the range and defining the benchmarks for the rest of the AEC industry.

Around the Industry Market Sector Status ............................................ 33 Growth Sectors ......................................................................... 33 Moderating Sectors ................................................................. 33 Moving Forward ....................................................................... 34 5.2 Geographic Hotspots ........................................... 34 5.1

Regions on the Rise ................................................................. 34 Geographic Outlook ................................................................ 35

Around the Industry

Market Sector Status M&A activity remains steady overall, but momentum is far from uniform. Growth is increasingly concentrated in sectors tied to sustainability, infrastructure renewal, and energy transition—areas now defining the industry’s next chapter. Recognizing where that momentum is building, and where it’s beginning to soften, offers a clearer view of what comes next. GROWTH SECTORS Environmental and infrastructure markets continue to anchor 2025 deal activity. Buyers are prioritizing practices with expertise in environmental consulting, water resources, and infrastructure resiliency—fields propelled by federal funding, ESG mandates, and long-term climate resilience goals. Energy transition work, from renewables to grid modernization and decarbonization—adds further momentum. Financially, these firms outperformed the industry median by 2%-3% ( 2025 Financial Performance Report ), offering both growth and stability. Together, these sectors have shifted from cyclical to strategic and now serve as the foundation for long-term portfolio growth across the AEC industry. MODERATING SECTORS Not all segments of the AEC industry are expanding equally. Data from the 2025 AEC M&A Outlook Survey and the 2025 Financial Performance Report point to a slowdown in commercial real estate, private development, and industrial design, particularly among architecture- focused firms. High interest rates and delayed project starts have tempered demand and narrowed buyer appetite.

Design firms with distinctive expertise or deep client relationships still attract interest, but selectivity has replaced scale as the defining factor.

2025 AEC M&A Outlook Report

Transportation infrastructure remains stable, though deal activity has leveled after several years of rapid growth.

Overall, the market is transitioning from broad-based expansion to more focused, evidence-driven acquisitions where performance, specialization, and strategic fit determine who moves next. MOVING FORWARD The AEC M&A market remains selective but strong, diversifying rather than declining. Buyers continue to pursue firms positioned in sustainability, resiliency, and energy transition where long-term growth drivers remain intact. Slower sectors are still active but face tighter valuations and greater scrutiny of backlog, margins, and leadership depth. Overall, the market is defined less by volatility and more by precision: buyers are concentrating capital where strategy and performance align. In the cycle, success belongs to firms that pair financial strength with a clear vision of how they shape the future of the built environment. Geographic hotspots Deal activity in 2025 is increasingly regional, clustering in markets where population growth, infrastructure investment, and sector specialization converge. The result is a concentrated but dynamic map of opportunity. REGIONS ON THE RISE The Southeast and Texas remain epicenters of M&A activity in the United States, accounting for nearly one-third of all transactions so far this year. In Florida, water management, coastal resiliency, and transportation infrastructure drive deal flow, while Texas leads in energy transition and land development centered around Houston, Dallas, and Austin.

On the West Coast, California anchors environmental and water- focused transactions linked to wildfire mitigation, drought resilience,

2025 AEC M&A Outlook Report

and renewable-energy planning. These firms often command above- average valuations supported by stable, long-term funding.

Internationally, Canada, the UK, and Australia mirror these trends, with cross-border buyers increasingly targeting US environmental and infrastructure specialists. GEOGRAPHIC OUTLOOK Looking ahead, AEC M&A will continue to follow population and policy momentum. The Southeast and Texas remain poised for outsized growth, while California leads in environmental innovation. As cross- border investment accelerates, these regions will shape where the capital flows next, and define the future map of industry consolidation.

Outlook & Key Themes

6.1 Short-term Outlook ............................................... 37 Market Fundamentals ....................................................... 37 Buyer Interests & Influences .............................................. 37 Acquisition Plans & Timing ............................................... 37 Sector Trends ....................................................................... 38 Sell-side Drivers .................................................................. 38 The Near Team ................................................................... 38 6.2 Medium-term Outlook ......................................... 39 Momentum Builds, Selectivity Increases ........................ 39 The Influece of Size, Sector & Growth ............................. 39 Reaching a New Balance .................................................. 40 6.3 Long-term Outlook .............................................. 41 Defining Long-Term Trends ............................................... 41 The Realities of Time .......................................................... 41

The Long Arc of Sector & Technological Development

Overall ..................................................................................

Outlook & Key Themes

Short-Term Outlook The near-term outlook for AEC M&A remains broadly positive, defined by stability rather than acceleration. Firms are entering 2026 with healthy margins, strong backlogs, and steady demand—especially in infrastructure, environmental, and energy transition markets. These fundamentals continue to provide confidence on both sides of the table. MARKET FUNDAMENTALS Momentum today is defined by focus and return. Buyers are pursuing firms that not only fit strategically, but demonstrate clear paths to value creation through profitability, recurring clients, and disciplined leadership. Sellers capable of translating operational strength into consistent returns remain in highest demand. BUYER INTERESTS & INFLUENCES Confidence on the buy-side remains high. More than 70% of firms surveyed plan to pursue an acquisition within the next one to three years, and roughly one-third say they are very likely to do so in the next 12 months. Growth trends point upward, but with more measured pacing than the surges of recent years. Buyers are focusing less on volume and more on strategic alignment, targeting firms that strengthen technical depth, regional presence, or long-term resilience. Sellers with strong leadership continuity, bac klog visibility, and differentiated expertise continue to command the most attention. ACQUISITION PLANS & TIMING Valuation sentiment is steady. Pricing remains competitive for high- performing firms, yet negotiations are increasingly disciplined as buyers seek balance between growth potential and risk. Capital remains accessible, but selectivity has become a new signal of strength.

2025 AEC M&A Outlook Report

Private equity’s role continues to expand as investors recognize that the AEC industry—once dominated by founder-led ownership—now offers institutional-grade opportunity. With post-bonus return on equity trending near 20%, the AEC industry stands out as a source of steady, high-yield investment in a volatile economy. This influx of outside capital is reshaping ownership models and fueling continued consolidation. Entering 2026, M&A activity is expected to stay robust, driven by firms and investors seeking reliable growth, sustainable returns, and long- term strategic value. SECTOR TRENDS The next 12 months will extend the sector dynamics that defined 2025— steady deal flow, concentrated demand, and rising investor interest in the AEC industry’s reliable returns. Environmental, water, and infrastructure-focused firms remain top targets. Sustained public investment, climate resilience, and energy transition intiatives continue to attract both strategic acquirers and outside capital seeking consistent yield. These sectors now represent some of the most stable, high-performing investments in the built environment. Architecture and design firms tied to commercial real estate face a slower pace, as financing constraints and softening development pipelines temper buyer enthusiasm. Yet design firms with niche expertise or deep client relationships will still command attention from selective acquirers. SELL-SIDE DRIVERS Ownership transition remains a key driver. For many leaders, M&A is less about exit than continuity—finding partners who can sustain culture, retain talent, and scale the next generation of ownership. THE NEAR-TERM Through 2026, deal activity is expected to remain steady but selective, concentrated in high-growth markets tied to sustainability, infrastructure renewal, and energy transformation.

2025 AEC M&A Outlook Report

Medium-Term Outlook Looking two to five years ahead, the AEC M&A market is expected to remain active—steady in volume but evolving in character. While today’s activity is powered by backlog strength and federal investment, the medium-term horizon will be defined by how firms respond to demographic shifts, technological integration, and capital market realignment. MOMENTUM BUILDS, SELECTIVITY INCREASES The 2025 AEC M&A Outlook Survey indicates that momentum will remain strong, though more discerning. Roughly two-thirds of surveyed buyers expect to pursue acquisitions within the next three to five years, but most plan to do so with a sharper focus on strategic fit. Buyers say they increasingly target firms with strong profitability, ESG expertise, and digital capabilities—particularly in data-driven infrastructure and environmental services. On the sell-side, leadership succession will continue to be the leading driver of activity. More than 55% of firms expect the retirement of senior principals to trigger a transaction within this timeframe, underscoring how ownership demographics will continue to shape deal flow well into 2027. Meanwhile, private equity-backed platforms are expected to remain highly active but shift from broad roll-up strategies to targeted bolt-on acquisitions. With many major consolidators already established, the next wave of deals will likely focus on niche technical expertise and geographic infill rather than sheer scale. THE INFLUENCE OF SIZE, SECTOR, & GROWTH Firm size will be an important determinant of who buys and who sells. Survey data shows that mid-sized firms (51-250 employees) are the most likely to pursue or accept acquisition offers in the next three to five years—more than twice as likely as very small firms and significantly more so than the largest enterprises. For many mid-sized practices, M&A offers a practical path to succession, growth capital, or expanded client reach without compromising independence.

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