Thinking outside the box

May 15, 2022

Will Anderson, CM&AA

When coming into the market to acquire a firm, it’s often wise to expand your horizons and think outside the box.

In this fast-paced M&A market we’re currently experiencing, many firms are going to market looking for a mirror image of themselves. While it’s easy to plan out a pro forma business model of a firm that’s just like yours and dream about the synergies and cost-savings, it’s simply not the reality of most transactions. A lot of the time these firms either have been acquired already, aren’t for sale, or simply don’t exist. After all, if they are that much like your firm, why would they want to sell and not acquire the same way you want to? When coming into the market to acquire a firm, it’s often wise to expand your horizons and think outside the box. Let me explain why.

Relatively frequently in the AEC M&A market, we’ll see a quite large – sometimes even publicly traded – firm acquire a 25-, 15-, or occasionally fewer than 10-person firm. You might ask, what value can a 1,000-person firm gain from a 25-person or fewer firm that they can’t buy elsewhere? Deep expertise that can’t be hired traditionally, that’s what they’re buying. Like what can be seen in the tech industry and private equity, large AEC firms are buying up smaller companies that have deep expertise in a particular market or service.

What is this deep expertise? In our industry, it’s recently been leaning more and more toward firms that have found innovative ways to integrate technology into their design, inspection, and other services. Due to the inherent scalable nature of this kind of technology integration, the employee count of these firms matters less while the intellectual property they’ve developed matters more and could, in theory, save/make larger businesses even more money. Small and mid-size firms in the M&A market can apply this by looking for firms that are very experienced in one of their secondary or auxiliary services that has been seeing more attention or revenues over the past year or two. Often, these smaller firms can be neatly tucked into your existing practice of that service and even greatly improve it.

Another reason you might want to consider thinking outside of your current offerings is for recruiting and retention purposes. A complaint we hear from firms that serve one vertical market is that their employees get bored of the same thing and want to try a different service/market. If your firm operates in only one service/market, then your employee(s) must quit to get the career satisfaction they desire. Not that there’s anything wrong with building a firm specifically around a certain niche market, as it often leads to higher profitability and better clients, but just know that this recruiting and retention “ceiling” caused by boredom exists and could be difficult to combat once your firm reaches a certain size.

While wanting to grow your firm in a specific niche is certainly understandable and even desirable, just know that – when looking to grow via M&A – finding a firm that’s a perfect extension of yours is easier said than done. Coming to the table with an open mind and looking for expertise in services/markets that your firm might be weaker in can often prove fruitful for both you and your clients’ firms down the road in terms of project quality and revenues. Creativity, especially when it comes to technology application and innovation in AEC, tends to pay in the long run. Happy hunting!

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Will Anderson is a mergers and acquisitions analyst at Zweig Group. Contact him at

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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.