Industry merger and acquisition activity grew 14% to about 200 deals nationwide last year but was relatively flat in the tristate region, says Mick Morrissey, managing principal at A/E/C management consulting firm Morrissey Goodale, in Newton, Massachusetts. Even so, many buyers continued to view the tristate region as a good place to spend their merger and acquisition dollars.
"New York tends to be a harder place [for an outside firm] to get into. That said, it tends to be one of the most popular states" for deals, Morrissey says. "That's because it is a significant economy—a world unto itself that's a very attractive place to be because it has so much work," when compared with many other regions, he says. Given the state's stringent licensing and practice laws, it is also easier and quicker for an outsider to enter the market via acquisition, he adds. New Jersey is another favorite market, largely because of its proximity to New York.
"Nobody does a lot of deals in Duluth, Minnesota, so you don't want to spend your acquisition dollars there," Morrissey says. "Nobody buys firms in Mississippi but the state beside it, Louisiana, is one of the hottest states—firms outside of the state are buying into Louisiana because they want to get into the oil action."
Last year, some 26 firms—primarily in the architecture and engineering sector, as well as the environmental consulting, land surveying, and landscape architecture practices—changed hands in New York, compared with 25 in 2011, and 18 in 2010, according to Morrissey Goodale. In 2012, there were 11 deals done in New Jersey and three in Connecticut.
Merger and acquisition activity in the region last year included Woburn, Massachusetts-based GEI Consultants's purchase of Garden City, New York-based EEA, a 14-person environmental and ecological consultancy; Lansing, Michigan-based Capital Consultants Architecture and Engineering's merger with Canton, New York-based Burley-Guminiak & Associates; San Diego-based Kleinfelder's acquisition of Princeton, New Jersey-based Omni Environmental; and Chicago-based Alfred Benesch & Co.'s merger with Glastonbury, Connecticut-based Purcell Associates.
Those types of deals, in which a buyer in one state scoops up market share in another, tended to be the growth strategy of industry firms prior to the recession. However, "since the recession and even more so in 2011 and 2012, closer to half the deals done in our industry have been within states," says Morrissey. Intrastate deals in the region last year included North Stonington, Connecticut-based A/Z Corp.'s merger with Hartford-based PMKArchitecture+Interiors; Sparta, New Jersey-based CP Engineers's asset purchase of Sparta-based engineering firm Cerenzio & Panaro; and Patchogue, New York-based BBS Architects & Engineers's acquisition of Bohemia, New York-based Ward Associates.
Blame the beating that balance sheets took during the recession when clients either did not pay in a timely manner or, worse yet, not at all, Morrissey says. "What we saw in 2011 and 2012 were firms [hit hard by the economy] that started talking with firms they knew who were in the same boat," and so the two combined forces, he says. One trend prior to 2011 was that large, publicly traded firms initiated about one third of the U.S. deals, Morrissey says. But in 2011 and 2012 only about one fifth of such firms did so "because a lot of them turned their sights on overseas markets where they saw relatively greater opportunities." As for major acquisition targets, firms with expertise in energy, particularly natural gas, and/or environmental sustainability are attractive now, he adds.
Recent deals that appear to have capitalized on those trends are Albany-based CHA Consulting's purchase of Boston-based Coler & Colantonio, a 175-person firm whose services include energy infrastructure, land development, environmental, and water and wastewater design and operation. Also, New York-based Thornton Tomasetti acquired San Francisco-based Simon & Associates, a six-person firm that will become part of Thornton Tomasetti's Building Sustainability practice.