M&A market expected to pick up speed in 2011

FAYETTEVILLE, ARK. — The mergers and acquisitions (M&A) market for architecture, engineering, planning, and environmental consulting firms is expected to accelerate in 2011 and some of the firms looking to buy may not even be based in the United States.

"If you’re a strong firm in the United States, if you’re looking to partner or exit, you should consider an international buyer," said Jeff Clark, managing director and principal of the M&A team for ZweigWhite. "Many successful international firms are working on projects that are truly making a mark on the world and are able to pay higher multiples for talented U.S. firms. With the prospect of working on better projects overseas for principals that stay on with the acquired company, and larger payouts for those looking to retire, the opportunities are there and very attractive for the top firms."

Experts also expect 2011 to be a year where the strong will get stronger and the weak will likely get weaker. If the economy continues to drag, the few companies doing very well and not considering an exit will be hunting for bargains and distress sales.

"Those not doing very well are looking for stability," said Franklin Agardy, president of Forensic Management Associates Inc., an environmental consulting firm in San Mateo, Calif. "They can ultimately go out of business if they don’t team up with someone.

"I think the market actually is going to accelerate in terms of mergers and acquisitions," he said.

Aggressive companies with cash to spend or the ability to borrow will be looking for more opportunities to buy in 2011, because the number of firms barely hanging in there is likely to increase if the economy doesn’t recover fast. This presents a great opportunity for cherry picking, Clark said.

"There are going to be some bargain hunters out there that are going to buy these distressed firms and consolidate them," he said.

Clark is bullish on the prediction that major players based outside the United States are looking to invest here, and firms operating in the water markets are the likely targets.

While big players with money to spend are looking to grow bigger and stronger by snapping up hot firms, midfield players are looking to become more competitive through strategic and surgical acquisitions, including firms that have struggled in the recession.

"There are deals out there for some of these troubled companies. They need to make a move," said Robert Brewer, a partner with Grassi & Co., a Jericho, N.Y.-based accounting firm.

A factor in that gamble is the loosening of credit markets that could make it possible for more deals to happen.

"That may be the start of more of 2011 and 2012 activity," Brewer said. "It’s taking some time for sure. They’re going cautiously."

What could also return as the economy improves are the mega deals that went missing in 2010, Brewer said.

Bottom line, Clark said, is that in 2011, "everyone should wear an M&A hat.

"I think more people are looking into M&A as an option," he said. "More people will try and more people might fail. You need to build an M&A team internally and with external advisors that know the discipline and the changing landscape of M&A in your markets to ensure success in 2011, more than ever."

Clark and other M&A experts will discuss transaction and integration strategies at the 2010 AEC Mergers & Acquisitions Summit Dec. 2-3, 2010, in Palm Beach, Fla. For more information, contact Sonya Stout at sstout@zweigwhite.com or 479-582-5700.