The economic crisis has hit the AEC industry hard, but companies that are ready to invest will find opportunities this year in their struggling counterparts. An increasing number of firms will be at risk for closing their doors over the next few years, which means buyers are in a great position to expand and eliminate competition. That’s the latest prediction from Steve Gido, CFA, a principal with ZweigWhite and leader of the firm’s Merger & Acquisition Advisory Services group.
Several factors will cause more sellers to emerge this year, multiplying the opportunities available to well-positioned firms. "Ownership and leadership transitions have been put on hold at many firms over the last decade because of record growth and profitability," Gido said, but with recent declines in profitability, many baby-boomer owners are now looking to make their exit. And with the looming expiration of 15 percent capital gains rates in 2010, which has resulted in dramatically higher after-tax proceeds to owners that have sold their businesses, more firm leaders will make their departure this year.
The risk associated with these distressed opportunities is that buyers will need to fix whatever internal problems brought firms down to begin with. "Ask any leader who has bought a troubled AEC firm on a rescue mission and they will tell you it can be either a bargain or quicksand," said Gido. "With that in mind, potential sellers will need to show a pipeline of work and new opportunities to present themselves as a viable and attractive opportunity."
Steve Gido’s article, "2009 M&A Outlook: The winds of change," ran in the December issue of AEC Finance News.