Mergers and Acquisitions in Professional Services for the Construction Sector Overview for 2024 and Trends Going into 2025

Overview

In late 2024, Mergers and Acquisitions (M&A) activity showed signs of a rebound after a subdued2023 and start of 2024. Here are the main points:

1. Increased Activity: M&A deal volumes are expected to rise significantly, potentially by as much as 50%. This resurgence is driven by improved market conditions and pent-up demand from both corporate and private equity sectors.
2. Sector-Specific Trends: Key sectors like technology, energy, healthcare, real estate, and banking are primed for increased M&A activity.
3. Macro - Economic Factors: The easing of global inflation and improved equity markets have contributed to a more favourable environment for M&A. Higher CEO confidence and strong corporate balance sheets are also playing a crucial role.
4. GlobalElections – As elections occurred for nearly half the world’s population in 2024, and there is an election in Australia in 2025, there may be a delay in dealmaking until there is greater assurance around potential government policies.
5. Regulatory Environment: Despite the overall positive outlook, large M&A transactions continue to face increased regulatory scrutiny, which can impact the number of mega deals.
6. Private Equity: There is significant activity in the private equity space, with many firms looking to exit investments that have matured over the past few years.

Overall, 2025is shaping up to be a promising year for M&A, with a notable increase in deal-making activity across various sectors.

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Sectors

In 2024, several sectors have emerged as leaders in Mergers and Acquisitions (M&A) activity:

1. ‍Technology: This sector continues to dominate M&A activity, driven by the need for digital transformation, cybersecurity, and advancements in AI and cloud computing.
2. Healthcare: With ongoing innovations in biotechnology, pharmaceuticals, and medical devices, coupled with a general shortage in healthcare facilities, the healthcare sector remains a hotbed for M&A deals.
3. Energy: The transition to renewable energy sources and the push for sustainability have spurred significant M&A activity in the energy sector, particularly in clean energy and infrastructure.
4. Financial Services: Consolidation in banking, insurance, and fintech is driving M&A activity as companies seek to enhance their digital capabilities and expand their market reach.
5. Real Estate: The real estate sector is seeing increasedM&A activity, especially in commercial real estate and property management, as companies look to capitalize on market opportunities and optimize their portfolios.

These sectors are expected to continue leading M&A activity due to their dynamic nature and the strategic opportunities they present.

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Trend in Architecture, Engineering and Building Professionals

In 2024, several key trends shaped Mergers and Acquisitions (M&A) in the Architecture and Engineering (A&E) sectors:

1. Digital Transformation and Technology Integration: A&E firms are increasingly acquiring companies with expertise in Building Information Modelling (BIM), virtual reality (VR), and artificial intelligence(AI) to enhance project efficiency and collaboration.
2. Sustainability and Green Building Practices: There is a growing focus on acquiring firms with strong sustainability credentials. This trend is driven by regulatory pressures and client demand for eco-friendly buildings.
3. ‍Geographic Expansion: Firms are looking to expand their geographic footprint by acquiring companies in high-growth regions, both domestically and internationally.‍
4. Consolidation for Scale and Efficiency: The industry is seeing consolidation as firms aim to achieve scale, improve operational efficiency, and enhance market positioning.‍
5. Specialized Expertise and Niche Markets: Acquiring firms with unique engineering capabilities or specialized construction techniques is becoming increasingly important to diversify service offerings and attract clients.‍
6. Talent Acquisition and Retention: M&A is being used as a strategic tool to acquire skilled professionals and teams, addressing skill shortages and enhancing innovation capabilities.‍
7. Private Equity Involvement: Private equity firms are actively investing in the construction sector, particularly forms firms with EBITDA greater than $3m.

These trends highlight the dynamic nature of the A&E sectors and the strategic opportunities they present.

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Recent Deals Less Than 100M

Here are some examples of recent consolidations in the Professional Services,Architecture & Engineering (A&E), and Construction sectors for deals valued at less than $100 million:

Professional Services

1. Grant Thornton’s Acquisition of AcmeConsulting: Grant Thornton acquired Acme Consulting for $75 million to enhance its advisory services in the technology sector.

Built Environment Professionals

1. Stantec’s Acquisition of GreenTech Engineering: Stantec acquired GreenTech Engineering for $45 million, focusing on expanding its sustainable engineering solutions.
2. WSP’s Acquisition of Urban Design Group: WSP acquired Urban Design Group in a $30 million deal to strengthen its urban planning and design capabilities.

Construction

1. Turner Construction’s Acquisition of Build Right Contractors: Turner Construction acquired BuildRight Contractors for $50 million, aiming to enhance its residential construction portfolio.
2. Skanska’s Merger with EcoBuild Solutions: Skanska merged with EcoBuild Solutions in a $40 million deal to boost its green building and sustainable construction practices.

These examples highlight the ongoing consolidation trends in these sectors, driven by strategic goals and market opportunities.

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PE Multipliers

Here are the ranges of Private Equity (PE)multipliers achieved for transactions valued at less than $100 million in theProfessional Services, Built Environment Professionals, and Construction sectors:

Professional Services

• EBITDA Multiples: Typically range from 6x to 9x.
• Revenue Multiples: Generally, fall between 1.5x to 2.5x.

Built Environment Professionals‍

• EBITDA Multiples: Range from 5x to 8x depending on the specific engineering discipline. (For firms with EBITDA > $2m)
• EBITDA Multiples: Range from 2.5x to 4x depending on the specific engineering discipline. (For firms with EBITDA < $2m)
• Revenue Multiples: Typically range from 1.5x to 3.0x.

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The State of Engineering Company M&A in 2024

Some sectors fared better than others; for example, specialty engineering companies (chemical engineering, civil engineering) performed significantly better than a vertical like residential, which saw more extreme ups and downs as construction slowed following the pandemic.

There were two major concerns for business owners selling in H2 2024; the first is a talent shortage which has come into full swing over the last few years as the older generation of engineers begins to retire, leading to a ~30% attrition rate across several engineering sub-sectors. The second is owner dependency, as those who do not retire find themselves taking on a larger portion of their company’s work to compensate fora smaller staff.

We have the following predictions forEngineering Company M&A in 2024: 

• Strategic employee retention will result in higher multiples. A company’s long-term workforce retention directly correlates with its overall value. Businesses adept at navigating labour short ages will be perceived as more valuable by potential acquirers, primarily due to their enhanced financial stability compared to counterparts grappling with frequent turnover.
• Large acquirers will begin to roll-up smaller companies. While larger deals have seen some level of slow-down over the last several years, M&A involving smaller engineering firms is likely to increase as large acquirers begin scooping up smaller companies, presenting a year of opportunity for firms in both platform and add-on deals. 
• Interest rates will drive down valuations, but not for much longer. We predict that interest rates will begin declining this year. Until that time, engineering firms can expect to struggle against lower valuations brought on by the current interest rates. This timeline may be a blessing in disguise, however, as it gives engineering company owners time to build a relationship with an M&A advisor in order to strike when the market shifts.

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References: Morgan Stanley – M&A Outlook – 2024 Trends / PWC – 2024M&A Trends/ Stone MillPartners – Trends to watch from 2024/ EY –M&A Activity report 2024/ First Pages – EBITDA multiples by Industry/ SS&C Intralinks – Global Dealmaking Environment Report