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O P I N I O N
Look before you leap
T he new year certainly hasn’t slowed the pace of consolidation among AEC firms. That became apparent in a recent two-day stretch when I had three in-person meetings with design firms and a long phone call with a fourth. All four firms asked me to keep them in mind if I hear about firms looking to sell. In today’s competitive market conditions, being able to spot red flags may prove helpful in knowing when to pull out of a discussion or for negotiating a more equitable transaction.
Rob Hughes
Indeed, many design firms are exploring acquisitions, especially given their difficulties filling key staffing needs to meet increasing demand for their services and to fulfill their desire to diversify. The latter may be a lesson from the Great Recession; many firms hit hardest were overly dependent on a relatively monolithic client base, while having a limited service, specialty mix, or geographic scope. Equally telling: Three of the four firms I met with are actively engaged in acquisitions. And they aren’t necessarily larger firms; one only has three licensed professionals. In discussions involving M&A, one wonders how much attention is (or should be) given to risk and insurance. While the firms I met may not have overlooked these issues, it was clear their ongoing discussions were pretty far along. They were
meeting with me for some other reason and to find out if I knew of any sellers, and only then did they ask if there was anything they should know or ask the sellers about insurance. Over the years, many checklists have been compiled of documents buyers should ask for from sellers, including loss runs, copies of policies and endorsements, applications, etc., in addition to considerations about possible impacts an acquisition might have on the seller’s and buyer’s insurance programs. Understanding how to evaluate, structure, and minimize any additional costs involving insurances may help a seller (especially a small-
See ROB HUGHES, page 12
THE ZWEIG LETTER April 1, 2019, ISSUE 1290
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