Is it the right time to buy or sell an A&E firm?
2021 has become a crucial year for mergers and acquisitions (M&A) in the architecture and engineering (A&E) industry. And the takeaway is: Be prepared.
Why was 2021 a big year for M&A?
Five factors fueled record deal announcements in the early months of 2021:
- An uptick in baby boomer retirements and divestitures accelerated transfer of ownership and succession decisions.
- Pending infrastructure legislation motivated firms to re-evaluate their competitive postures.
- There was a sense of urgency for firms to recapitalize, expand geographical footprints, crack new vertical markets or add expertise before record-low interest rates moved up.
- Government agencies were under increased pressure to respond to climate events. By some estimates, up to 30% of new M&A activity in 2021 involved the environmental services sector.
- A&E firms started rethinking office and workforce norms that were upended by the COVID-19 pandemic.
M&A considerations for buyers and sellers
Even if you’re not currently considering a deal, potential M&A scenarios should factor into your long-range planning. If you’re prepared, you can maximize the value of your firm or create favorable cash or financing conditions.
M&A considerations for potential buyers
- Properly planned and executed acquisitions can expand your geographical presence and move you closer to strategic clients or prospects.
- M&A gives you the opportunity to expand your service offerings in verticals where you don’t have established expertise or brand equity.
- Buyers can acquire strong talent that can be groomed for leadership.
M&A considerations for potential sellers
- After cost-cutting and process improvement measures to stay solvent through the pandemic, most A&E firms are in a strong cash position. This could be a favorable time for a valuation.
- There’s less buyer-side competition right now, and new capital is relatively cheap (for now).
- Being acquired can help you meet or accelerate ownership transfer goals.
- Done right, M&A can help ensure the longevity of your firm and the well-being of employees and customers.
How Wipfli can help
We help architects and engineers navigate the tax and accounting implications of M&A transactions so they can maximize their returns and create value beyond the deal. Start expansion and succession conversations today, so you’re prepared when the time is right. Contact us to start planning.
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