Supersized Competition: What You Need to Know About the Creation of A/E/C Megafirms

by admin / 22 May 2013 / No Comments

Executive Summary

Historically, the typical business model in the A/E/C industry was one of small, closely held firms with narrowly defined services serving local markets. While there are still plenty of firms that meet this description, the face of industry has changed dramatically.

In 1965, when Engineering News–Record (ENR) published its first ranking of design firms, the top 456 firms combined billed a total of $728 million for design services. By the 2009 list, 22 firms reported design revenues in excess of $750 million each with the largest firms taking in a whopping $5.5 billion. Add to that the breadth of design services offered and often additional revenues from construction services and it becomes clear: These firms are no longer simply “large,” they are MEGA.

Much of this growth can be attributed to strategic acquisitions, which position megafirms well in an increasingly global market where sophisticated clients build seemingly ever more complex projects of enormous size. Though mergers and acquisitions are nothing new in the industry, the last five years have not only seen record numbers of deals but also a variety of acquisitions of well-known firms of significant size.

A variety of conditions present today such as globalization, vendor consolidation programs, and a push towards integrated services provide incentives for firms to continue to expand their services and global reach. At the same time, an increasing number of principals of A/E/C firms are reaching retirement age and are looking for exit strategies. Selling the firm to a larger entity can be attractive alternative to the traditional internal ownership transition. Combined, this means that there is an increased interest to buy as well as a larger pool of firms willing to sell, making it likely that the trend towards consolidation will continue. The fact that most megafirms are publicly traded no only makes it easier for them to raise capital to fund acquisitions but it also adds pressure from shareholders to maintain high growth rates. Therefore, megafirms are likely to continue their acquisition strategics, gaining even more market share. To continue reading, please log on to the National website here.

By: Alexandra Brown, Marketing Manager, Kaufman Lynn Construction and Scott Mickle, CPSM, Director of Business Development, LandDesign



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