Architecture, engineering, and construction (A/E/C) firm valuations, like a lot of things these days, seem to just keep on climbing, and this is driving mergers & acquisitions (M&A) at a feverish pitch in all corners of the industry. If you have been considering an external sale to create liquidity and facilitate exit planning, there may never be a better time than right now.

Elevated M&A activity is being fueled by A/E/C firms that have been delivering robust (if not record-setting) profit margins since the onset of the global pandemic. These firms have balance sheets flush with idle cash, and they are putting that capital to work to create long-term value.

Of course, this frenzy has CEOs and other firm leaders wondering: Do inflated valuations make this a lousy time to consider growth through acquisition? No, they don’t… if you remember these three truths for M&A success:

Truth No. 1: You can’t time the market. Any well-built M&A strategy needs to be much more focused on long-term value creation over short-term market timing. Even if valuations fall in a few years, there are so many other external and internal variables at play that make it extremely difficult (if not impossible) to predict the optimal time for a deal.

Truth No. 2: There’s a lot more to the transaction than just valuation. There’s an old phrase “you name the price and I’ll name the terms” and this is very relevant now. Valuation and transaction structure are two very different (but very inter-related) elements. Seemingly small changes in the transaction structure can have a big impact on the seller’s after-tax proceeds as well as the buyer’s post-transaction risk profile. In other words, always consider the totality of the deal and not just the valuation.

Truth No. 3: More sellers in the market right now is a good thing. Finding quality sellers is often the biggest bottleneck to growth by acquisition. With valuations at or near record-high levels, more sellers are open to conversations, and this is great news for frustrated buyers. That perfect fit firm whose CEO wouldn’t take a meeting a few years ago might be ready to talk now.

One great example of an active buyer who isn’t sitting on the sidelines in today’s market is in the private equity space. PSMJ Senior M&A Consultant Karl Wohler recently facilitated a transaction with private equity firm Godspeed Capital and 80-person architecture, engineering, and surveying firm Prime Engineering, Inc. (Atlanta, GA). A recent Building Design + Construction article covering this transaction stated “With nearly 4,000 U.S. private equity firms holding approximately $2 trillion in available capital—“dry powder” is the industry term—A/E/C firms desiring to make strategic investments can readily receive the capital they need to pursue ambitious goals that can pay off big down the line.”

If growth isn’t in your plans, private equity isn’t waiting around…and neither should you.

We’ve loaded up PSMJ’s upcoming A/E/C Mergers & Acquisitions Success Workshop on May 10-11, 2022 in Boston, with lots more current insight like this and specific details on how actual just-closed transactions are happening in this market. Don’t make a million-dollar mistake…book your spot today!