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Engineering Is Booming. Private Equity Wants In

Towering skyscrapers, sprawling developments and buzzing retail centers have long appealed to private equity groups, whose investors can see, touch and tour the tangible assets that bring in revenue. 

Now those same investors are increasingly seeing the value in the typically unseen engineering firms behind the projects. That's largely due to a mass of federal funding flooding into infrastructure and construction projects, and some engineering firms say they are fielding acquisition offers on an almost weekly basis.

What that portends for the industry is a matter of debate, with some viewing the consolidation as much-needed fuel for growth and others worried about a shrinking competitive field.


“We get approached two or three times a month,” Stephen DeSimone said about private equity interest in his firm, Manhattan-based DeSimone Consulting Engineering. “It used to be once a year, maybe twice a year. They used to be pretty discreet about it. Now they just leave voicemail messages.”

Private equity spent $4.5B on engineering and construction acquisitions last year. This year is tracking to be the fourth year in a row with more than 400 mergers and acquisitions in the architecture, engineering and environmental space, and 41% of all year-to-date deal activity was backed by private equity buyers, according to industry consulting firm Morrissey Goodale.

The fast-paced M&A activity can offer relief to engineering firms that are desperate for a cash infusion, looking to grow substantially or in need of new leadership. But some warn of danger in all of the stepped-up activity, citing potential loss of specialization in the craft and an increasingly monopolized industry that could chill competition.

DeSimone said his firm isn't interested in selling, especially not to private equity, although it does want to grow. DeSimone has completed five acquisitions in the past three years, he said. 

Yet private equity firms have found plenty of architecture, engineering and construction buying opportunities this year. Examples include Blackstone acquiring a minor stake in Salas O’Brien and Miami-based H.I.G. Capital acquiring Albany-based CHA Consulting, an engineering, design, consulting and program management firm. Both deals were in January. 

Acquisitions can be beneficial for firms that have a leader ready to retire and no replacement lined up or smaller firms that need fast cash amid a difficult economic environment, DeSimone said. 

It presents a doubly beneficial opportunity to commercial real estate firms that want to expand their in-house services. 

In February, CBRE Group agreed to buy J&J Worldwide Services, a provider of facilities maintenance and engineering services for the federal government. CBRE CEO Bob Sulentic said the move aligned with CBRE's strategy to enhance its technical services capabilities and increase revenue and secular growth.

Colliers in June agreed to acquire Canadian engineering, environmental and inspection services firm Englobe Corp. for $475M. That marked its second engineering firm acquisition in four years, which CEO Jay Hennick said would “accelerate our growth going forward, as well as offer better services to our clients and more opportunities to our professionals.”

There were 240 M&A deals in the U.S. architecture, engineering and environmental industries through the end of June this year, almost exactly in line with the deal level at this time last year, according to Morrissey Goodale. Last year saw 443 total deals, down from the record 484 in 2022 but still significantly elevated over years past. 

Broader M&A market activity peaked in 2021 and sharply declined through 2023, largely due to high inflation and interest rates. But the architecture and engineering industry has shown more resilience. The AE deal activity since 2021 is double that of almost all years prior to 2018, Morrissey Goodale data shows. 

Federal funding, coupled with the country’s aging infrastructure, has driven investment in the industry, according to Morrissey Goodale, which noted that the surge has also been prompted by a need to boost workforces and deal with “the demand of unprecedented project backlogs.” 

“The federal government has set aside like a trillion dollars for infrastructure in five years,” DeSimone said. “I think that's what most likely accelerated the number of inquiries.” 

The CHIPS Act, signed in 2022, provides $52.7B for American semiconductor research, development and manufacturing, while the Infrastructure Investment and Jobs Act of 2021 commits $1.2T to help improve roads, bridges, water systems, broadband internet, ports and airports. 


Windward Engineers & Consultants, which has seven offices scattered throughout the U.S. and will soon open another, wants to grow to meet the soaring needs of its clients, Windward President Jason Booth said. It hasn't fielded many acquisition offers, but it plans to soon jump in on the buying side, he said.

“It’s very hard to grow organically through hiring,” Booth said. “If I was trying to build a presence in Chicago, it would cost me a ton of money in hiring fees with a lot of question marks on whether or not that team can produce.” 

Existing engineering firms have a history and reputation, making them a good bet for another firm to invest in, he said. 

Increased consolidation in the industry enables firms to improve operating efficiencies and leverage the best practices of both companies while also enhancing economies of scale and broadening service capabilities, Morrissey Goodale said. But rapid M&A comes with the potential downside of reduced competition, along with negative pricing impacts and poorer service quality, the consulting company added.

DeSimone wouldn't consider accepting private equity funding because engineering is a highly specialized industry, and private equity firms don’t come with that expertise.

“It’s potentially harmful in that private equity firms are going to put profits above relationships and quality,” DeSimone said. “But I also think it’s going to be helpful [to the engineering industry] because the firms that realize the threat are going to be forced to really up their game.” 

Yet not everyone in the industry agrees. Booth said he doesn’t mind private equity’s presence in engineering, adding he doesn’t begrudge anyone the chance to compete.

“There is consolidation out there, and more power to them,” he said. “They understand the same thing we’re trying to think about, which is, ‘How do we grow to meet the needs of our clients?’” 

DeSimone warned that firms like his are dependent on people and relationships, adding that “the ability to pick up the phone and talk to an owner matters to a lot of our development clients.”

But anyone staring down an empty checkbook and getting thrown a lifeline is going to take it, he said.

CHA Consulting was acquired by H.I.G. this year, but it has been backed by private equity since 2008, CHA CEO Jim Stephenson said. The H.I.G. transaction was the third time CHA has been acquired, but this round definitely brought the most suitors.

“Being early into this, in 2008, there were very few private equity firms shopping around in the A&E space,” Stephenson said. “Fast forward to the last decade, in particular the last five years … you can see that the volume of private equity-backed firms really started to take off.” 

When a banker put out feelers for CHA’s most recent acquisition, more than 40 firms showed interest, he said. Upward of 10 firms were willing to go through due diligence to learn more about making a formal offer, he said.


While H.I.G. aligned best with what CHA was looking for, there were several good options to choose from, Stephenson said. CHA is attracted to private equity because it helps focus on growth, he said. 

“There’s always this adage of, ‘Private equity is going to tear the business apart, really focus on costs and get rid of fast,’” he said. “But that’s not their business model at all.” 

The best firms support and energize growth, identify potential in the business and attract and retain the best talent, Stephenson said. Private equity does require firms to be comfortable with different pressures, which can present a challenge, he said.

“You’re going to be moving at a certain pace,” Stephenson said. “Private equity will always tell you there’s no specific time horizon [to when they will exit]. It’s really about, ‘Have we all agreed that we’ve met the metrics, the growth objectives, the value objectives, and is the market in a good place to think about recapitalizing?’” 

Engineering is a people-intensive industry, so the last thing private equity would want is to constantly rip people out and replace them, he said. 

“From the outside looking in, it’s like, ‘Oh, private equity has entered the game. This is going to be a disaster,’” Stephenson said.

But private equity has become smarter about creating value and partnering with firms to deliver great outcomes, he said. 

“The old days of, ‘Let's really clamp down on costs and wring every last dollar and then set on a path to sell it,’ that's not the playbook that I'm accustomed to,” Stephenson said.