Mergers and acquisitions

    Figure 1: Expected versus actual transaction values as a percent of net service revenue

    In Zweig Group’s 2016 Merger & Acquisition Survey, researchers found that the gap between actual M&A transaction values and expected values for future M&A activity has narrowed during the last five years. The shift in sentiment of firm value as a multiple of pre-distribution EBITDA and transaction prices as a percent of net service revenue have actually gone in different directions.

    The gap between expectations and reality as well as historical trends show interesting year-over-year adjustments. The expected sales price, as a multiple of EBITDA, has decreased for the last five years. In fact, this year it lined up reasonably well with real transaction values. Expected firm price as a percent of net service revenue has gone up year over year and so have the actual values (percent of net service revenue) of market transactions (see Figure 1). In terms of transactions as a multiple of a firm’s book value, both expected and actual transaction values have stayed relatively consistent during the last five years.

    It is important to follow these trends as consolidation continues across architecture, engineering, and environmental consulting firms. One of the most important things firms and their owners can consider is whether they are ready to sell. Years of data show that when selling firms are better prepared and well represented, their total transaction value tends to be much greater.   

    Jamie Claire Kiser, director of M&A Services for Zweig Group, noted, “Understanding the market is the first step for anyone — a buyer or a seller — who wants to get involved in M&A. It’s easy to grow overwhelmed without a solid grounding of research, and our survey is a great starting point for thinking through M&A based on real examples and input from buyers and sellers of all sizes.”

    When asked which disciplines were added with their latest acquisition, respondents stated that architecture (42 percent) was the most frequently added discipline. Civil engineering (33 percent), structural engineering (25 percent), and interior design (17 percent) rounded out the top four. Profiles of both buying and selling firms revealed that buyers were more likely to rate their latest acquisition a success if the acquired firm offered fewer disciplines. The success rating went down incrementally when more than one discipline was acquired. Respondents also stated that a staggering 91 percent of deals (their latest M&A activity over the last five years) closed in under one year.

    Will Swearingen is director of Books and Surveys. He can be contacted at

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