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environmental services, or architecture services are most sought-after. Each of these disciplines amount to roughly 18 percent of sellers; or more than 54 percent of the total sellers. However, many of the main markets for these firms were industry agnostic – meaning they had no main market and operated in a variety of markets. The most prevalent markets that these firms operated in were commercial and residential (21 percent), government (14 percent), education (12 percent), and water/wastewater (8 percent). The data indicates that there were a great deal of strategic acquisitions in terms of services and markets even though the industry’s most active buyers are still prioritizing water/wastewater, transportation, and environmental firms in their acquisition efforts for 2023. ■ Size and geography. Prior years have shown us that there are certain geographic hotspots where buyers are more interested in acquiring. These hotspots include California, Florida, and Texas. Unsurprisingly, these states were still the hotspots in 2022. To break it down, 45 firms were acquired in California, 43 in Florida, and 37 in Texas. There were 358 total firms acquired in the United States, meaning that these three states account for just over 35 percent of total U.S. based transactions. Historically, the median size of the acquired firms has been relatively small (30 employees in 2021, 25 employees in 2020, and 20 employees in 2019) and we saw this trend continue in 2022 with the median size being 26 employees. It gets interesting on the buyer side, where the median size declined from 700 in 2021 to 560 in 2022. The median size for buyers from 2014 to 2020 was 460 employees, but that was when the number of transactions each year ranged from 340 to 390. With 2021 being a massive year in the volume of transactions, we can interpret that there were more and bigger players utilizing mergers and acquisitions as their growth strategy starting in 2021. ■ Private equity involvement. Similarly to 2021, we continued to see private equity involvement in our industry in 2022. Private equity buyers in 2022 accounted for 30 transactions, compared to 37 transactions in 2021. However, the number of companies acquired as a platform company and private equity backed transactions increased by more than 20 percent. We’re seeing private equity backed AEC firms utilizing this backing to grow in terms of both size and service offerings. The firms utilizing this strategy include, but are certainly not limited to, Trilon Group (seven acquisitions), Ardurra Group (five acquisitions), and Global Infrastructure Solutions (four acquisitions). Nevertheless, this does not take away from firms that were active buyers in our industry without private equity backing, including RSK Group (19 acquisitions), WSP Global (eight acquisitions), and Salas O’Brien (seven acquisitions). The trends above are certainly not the only ones to come out of the 552 total acquisitions that occurred in the AEC industry during 2022, but they were some of the most noticeable. We’ll continue to gather M&A activity data this year and report on the trends and noticeable investments from the players of our industry. To learn more about Zweig Group’s M&A advisory services, click here. Adrian De la Garza, CM&AA is a senior analyst within Zwieg Group’s M&A advisory team. Contact him at adelagarza@zweiggroup.com.
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THE ZWEIG LETTER FEBRUARY 27, 2023, ISSUE 1478
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