The gap between actual M&A transaction values and expected values for future M&A activity has narrowed over the last five years
Oct 31, 2016
In Zweig Group’s 2016 Merger & Acquisition Survey, researchers found that the gap between actual M&A transaction values and expected values for future M&A activity has narrowed over the last five years. The shift in sentiment of firm value, as a multiple of pre-distribution EBITDA and transaction prices as a percent of net service revenue, have actually gone in different directions.
The gap between expectations and reality as well as historical trends show interesting year-over-year adjustments. The expected sales price, as a multiple of EBITDA, has decreased for the last five years. In fact, this year, it lined up reasonably well with real transaction values. Expected firm price as a percent of net service revenue has gone up year over year and so have the actual values (percent of NSR) of market transactions. In terms of transactions as a multiple of a firm’s book value, both expected and actual transaction values have stayed relatively consistent over the past five years.
It is important to follow these trends as consolidation continues across architecture, engineering and environmental consulting firms. One of the most important things firms and their owners can consider is, are we ready to sell? Years of data show that when selling firms are better prepared and well represented, their total transaction value tends to be much higher. Jamie Claire Kiser, Director of M&A Services for Zweig Group, noted that “understanding the market is the first step for anyone - a buyer or a seller - who wants to get involved in M&A. It's easy to grow overwhelmed without a solid grounding of research, and our survey is a great starting point for thinking through M&A based on real examples and input from buyers and sellers of all sizes."
When asked what disciplines were added with their latest acquisition, respondents stated that architecture (42%) was the most frequently added discipline, civil engineering (33%), structural engineering (25%), and interior design (17%) rounded out the top four. We looked at the profiles of both buying and selling firms and found that buyers were more likely to rate their latest acquisition a success if the acquired firm offered fewer disciplines. The success rating went down incrementally when more than one discipline was acquired. Respondents also stated that a staggering 91% of deals (their latest M&A activity over the last five years) closed in under one year.
The 2016 Merger & Acquisition Survey has new and improved analysis of survey data and includes detailed comparisons of buying and selling firm profiles. If you are curious about mergers and acquisitions in the architecture, engineering and environmental consulting market, this publication is a must read. If you have any questions about the survey or M&A activity in general, please reach out to Zweig Group: email@example.com
About Zweig Group
Zweig Group, three times on the Inc. 500/5000 list, is the industry leader and premiere authority in AEC firm management and marketing, the go-to source for data and research, and the leading provider of customized learning and training. Zweig Group exists to help AEC firms succeed in a complicated and challenging marketplace through services that include: Mergers & Acquisitions, Strategic Planning, Valuation, Executive Search, Board of Director Services, Ownership Transition, Marketing & Branding, and Business Development Training. The firm has offices in Dallas and Fayetteville, Arkansas.
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