2020 Valuation Report of AEC Firms

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By Tyler Thompson

Zweig Group recently released its 2020 Valuation Report of AEC Firms. This publication was compiled with data gathered from architecture, engineering, and design industry firms that have used an internal formula for valuation, have been merged or acquired, or that have been appraised by an independent valuation consultant.

When it comes to estimating the value of a business enterprise, it is important to understand exactly what is being valued and for what purpose. Without an established market in which a firm’s shares are actively traded, an appraiser can only estimate the market value through the application of pertinent measures and indicators of Value from relevant data.

This compilation of data provides some benchmarks and metrics that allow firms to see how their own Value ratios stack up against industry norms.

Zweig Group calculates six different value ratios that determine Zweig Group’s Z-Value formulas. Four of these ratios relate the total value of the firm to firm size, net service revenue, EBITDA, and backlog. The other two ratios relate the equity value of the firm to net pre-tax, pre-bonus profit and book value. Using the median figure of each of these value ratios in one single formula, a more reliable indicator of firm value can be calculated.

This formula determines the four Z-Values (Z1, Z2, Z3, & Z4) based on different criteria within the data set. The Z1-value is based on all valuations, whether by formula or appraisal. Next, the Z2-value is derived exclusively from valuations that were performed by an independent business appraiser. The Z3-value is calculated by filtering the sample down to only the firms that had a valuation performed for an internal ownership transition. Finally, the Z4-value is based only on the valuations performed for ERISA, ESOP, or IRS requirements.

These statistically derived Z-values may facilitate comparisons between different firms and between multiple valuations of the same firm. Raw Z-values can be adjusted upward or downward considering the effects of these variables as indicated by the survey results. Variables include but are not limited to purpose of valuation, type of firm, age of firm, and size of firm.

The 2020 Valuation Report of AEC Firms also presents annual values based on years of publications. For each of the six value ratios, the progression of overall median values over time is represented graphically for firms to detect industry trends. Additionally, value ratios for each of the Z-Values are shown over a five-year period.


Tyler Thompson is the Research Manager at Zweig Group. He can be reached at research@zweiggroup.com.

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