Inside the Executive Roundtable

This event is a catalyst for honest conversation, shared wisdom, and renewed focus on ownership, governance, and the future of the industry.

Each year, Zweig Group hosts an Executive Roundtable designed to give senior AEC firm leaders a rare opportunity to step away from the day-to-day to focus on strategic thinking. Thanks to our new partnership, I had the privilege of helping the Zweig Group team “host” the most recent roundtable in Boston.

I put the “host” in quotes because the AEC executives in the room were so eager to share their experiences and strategies with one another that very little facilitation was needed. This openness is a hallmark of the AEC industry and something I deeply admire. I encourage every leadership team to participate in this type of session; you’ll walk away with valuable insights that only peer-to-peer dialogue can offer.

While the conversations touched on a wide array of topics, one surfaced repeatedly: the multi-dimensional issue of ownership. It’s an issue we’ve long advised clients to treat as a continuous process versus an event. And this group reinforced that view in spades. Even firms with several generational transitions under their belts reported new challenges to their ownership and governance models. These challenges fell into three major, but interconnected categories:

1. Finding young leaders who also want to be owners. At its core, ownership transition is a people issue, and this group of executives knew this well. Several firms shared recent changes they had made to make ownership more affordable or more desirable overall but with negligible results. The risk/reward equation around ownership has shifted for the current 30- and 40-somethings.
   Several of the roundtable participants expressed frustration at not fully understanding this shift in mindset, and concern that it could undermine the sustainability of their ownership models. The key takeaway here was the need for firms to invest more in business education of future leaders and the practical realities of ownership. None of the attendees reported that they regretted becoming an owner in their own firms, but few had shared their journey with their next-gen leaders.
2. Private equity is offering a “quick fix” to ownership challenges. Almost every firm leader reported receiving multiple solicitations from PE firms or AEC platform firms backed by private equity. And yes, it sounded like the rumors about how much a private equity firm will pay for an AEC firm are true.
   The “godfather” of AEC mergers and acquisitions, George Christodoulo, delivered an engaging session about the pros and cons of selling to private equity. He shared real-world examples ranging from remarkable success stories to nightmare scenarios. A key insight many attendees agreed on is that if PE is going to be the right fit, they must bring more than just money.
   If the high valuations being offered are based on synergistic revenue and profit growth, how that can be accomplished must be part of the offer. If your firm can truly be strengthened by selling to PE, your key people will be more likely to come along. However, if you treat PE as the buyer of last resort and don’t consider the next-gen leaders, things can go badly.
3. Your shareholder agreement should be a living document. Many attendees shared how their firms had outgrown their governance structure, and in some cases had even outgrown certain key shareholders’ capabilities. This situation was exacerbated by the outdated ownership agreements, making it very difficult to make the necessary changes.
   I have experienced this myself over the years with many clients. If done well, getting a comprehensive buy-sell agreement in place among a small group of shareholders is a daunting task. Lawyer-fatigue is a real symptom and by the time the agreement is signed, everyone wants to put it in the file drawer and forget about it.
   Several uneventful years go by but then laws change, shareholders’ roles and responsibilities change, and new shareholders are needed to sustain the firm. The agreement has fallen hopelessly behind the business.
   The openness of the roundtable setting allowed one attendee to share that a similar situation left their firm vulnerable. The firm found itself between two bad choices: try to enforce an agreement that everyone knew was outdated or try to rewrite their agreement in the middle of a performance issue with a shareholder. The key takeaway here: dust off your shareholder agreement at least every other year, especially as your firm’s ownership and governance grow more complex.

A worthwhile investment of time.

The most valuable insight from the executive roundtable was simple, if you don’t make time to proactively evaluate your ownership structure, you will eventually be forced to react, most likely under pressure.

There was broad consensus at the roundtable that ownership problems are much more difficult to solve in the middle of a crisis, when stress and drama can cloud decision-making. By stepping back, reflecting, and sharing with peers, firm leaders can identify risks early and set a stronger course for the future.

Special thanks to Zweig Group for creating such a valuable space for AEC leaders to come together and engage in meaningful, strategic dialogue. The Executive Roundtable is more than just an event, it’s a catalyst for honest conversation, shared wisdom, and renewed focus. I’m grateful for the opportunity to be part of it and look forward to seeing how these important discussions continue to shape the future of our industry. 

Brad Wilson, CMA, MBA, is director of Strategic Growth Advisory at Stambaugh Ness. Connect with him on LinkedIn.