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Construction Dive
os Angeles-based construction and engineering giant AECOM is in talks with Canadian firm WSP Global Inc. about a possible deal, Bloomberg reported Monday night. Media reports said that WSP approached AECOM about the potential transaction, according to sources familiar with the two companies.

Although there is no guarantee that the talks will lead to a deal or how a deal would play out, analyst Andrew Wittmann said in a written research report that he believes the discussions "likely have some merit" for several reasons, including the fact that WSP's stated goals include acquisitive growth, that AECOM stock has inexplicably climbed in recent days and that AECOM leadership is currently transitioning. Chairman and CEO Michael S. Burke announced in November that he will retire this year.

In addition, a deal could help the two firms — which both operate across hundreds of local offices mainly concentrated in North America — save on costs, consolidate real estate, streamline procurement and system investments and help meet AECOM's "very aggressive" F2021 EBITDA guidance, said Wittmann, a senior research analyst with Baird Equity Research's Industrial Services division​. While Montreal-based WSP has been growing in recent years with multiple acquisitions, AECOM recently announced the sale of one of its divisions.

The $2.4 billion sale of AECOM's Management Services business to two private equity firms is expected to close in the first quarter of 2020, and the company’s Civil Construction business is also​ on the block, analyst Michael Corelli, vice president and senior credit officer for Moody's Investor Service, told Construction Dive.

In June, Starboard Value LP, an AECOM investor that owns approximately 4% of the company's common stock, called on the board of directors to consider selling its construction services unit, according to a letter from Peter Feld, Starboard's managing member. Company leaders said they would review the letter.

Meanwhile, WSP's acquisitions of U.S.-based construction and engineering firms go back several years. In 2018, WSP bought Berger Group Holdings Inc., parent of the group of companies operating under the umbrella name of Louis Berger, a Morristown, N.J.-based international professional services firm, for $400 million, according to ENR. And in 2014, it acquired New York City-based Parsons Brinckerhoff for about $1.4 billion.

In recent days, WSP closed an acquisition in December of Lancaster, N.Y.-based environmental consulting firm Ecology and Environment Inc., a 775-employee, publicly traded company that works with governments and private customers worldwide, including the EPA and U.S. Army Corps of Engineers. The $65 million deal included a special dividend of approximately $2.2 million, according to a press statement.

At the time of the announcement, WSP U.S. president and CEO Lou Cornell said that the transaction would enable the firm to "fulfill its strategic ambition of enhancing our activities in the United States."

WSP provides engineering and design services to clients in the transportation, infrastructure, buildings, environment, power and energy industries, according to its website. The company employs approximately 50,000 employees, including approximately 10,500 in the United States.

WSP is part of LaGuardia Gateway Partners, the team designing and building the $3.6 billion Central Terminal B at LaGuardia Airport in New York City, one of the largest public-private partnerships (P3) currently undertaken in the U.S.

Representatives for AECOM and WSP didn’t immediately respond to Construction Dive's requests for comment.
Builder Online
Check out what M&A meisters Michael Kahn, Joe Walsh, and Peter Hazeloop have to say about deal flow in a new period of growing uncertainty.

Michael P. Kahn is one of home building's most-active and--at age 83--most-senior, active senior statesmen. He has known most of the people who run America's big home building companies since they were kids.

They take his call. They return his call. Or they initiate contact with him when they're thinking about selling or buying a home building firm. They've been doing that for about as long as anybody can remember. His knowledge of what they do, what they care about, and fret about, and get really excited about dates back to his own days as a builder and developer in the early 1960s and spans, from then to now, across 125 home building firm mergers and acquisitions deals since 1988. That's an average of one closing every 90 days for the past 31 years.

And there are more in the pipeline.

"They keep calling me," says Kahn, whom Century Communities co-ceo Dale Fransescon has knighted "the dean of home building M&A," and who tried--unsuccessfully--to retire in 2011 as the Great Recession held the business in its tight grip. "We're working with three companies right now who are looking to sell, and I just got contacted to do some buy-side work for a public builder looking to acquire."

The reason they "keep calling" Mike, and the reason they keep returning his calls is pretty simple. Mike knows that good deals equate to value both buyer and seller get--beyond fair dollar market value for tangible real estate assets--and both buyers and sellers trust him and his process to deliver on expectations that particular combination sets. Deals that go well, Mike will tell you, do so not only on the back of KPIs, but human beings. Deals that don't often look great on paper but fail the people sniff test.

Today is tricky for M&A.

Seller motivation and urgency come from a pool of both shared and unique issues. Same with buyer goals. In one instance, an interested seller may be "of an age" where he or she wants an exit before the next down cycle, whenever that may be. In another, the goal may be tantamount to a deep-pocketed capital partner for a growth path into the next up cycle. Buyers may want deeper market scale, or greater exposure to customer segments, such as entry-level or 55+, or may want to thwart rivals in a market, or may want to establish a beachhead in a market new to their footprint.

At the same time, uncertainty, volatility, and an absence of predictability pronounce themselves as ever more material challenges for those who're trying to model growth, profits, and opportunity and risk.

As is always the case where people transact, highly motivated or time-constrained buyers will value the same assets higher than those whose urgency settings are in a longer-term frame. The same goes for sellers--keenness to close opens them to greater willingness to negotiate terms.

It's generally acknowledged that the pace of deals has slowed, but for Michael Kahn & Associates, the cadence has kept up. So, he's reached out to two long-time partners Peter Hazeloop and Joe Walsh, principals of Hazeloop-Walsh & Associates, to carry important parts of each process forward over the months buyers and sellers take to combine from this point forward. Kahn and his firm will partner with Hazeloop and Walsh's company in a joint venture, reuniting them for the research, due diligence, valuation, negotiation, and other disciplines they've mastered as match-makers for decades.

Michael, Joe, and Peter have outlined, exclusively for BUILDER, some of their take on the current drivers of M&A business activity, and where they're headed leading into 2020 and beyond. What follows is their co-authored perspectives on key dynamics motivating buyers and sellers in the late-stage recovery housing has entered:

Current State:
The height of post-recovery home building M&A activity spanned from 2013 to 2017, and it has cooled off somewhat since then. This is due in part because the number of quality candidates has fallen off as many have been acquired. By quality candidates, we mean builders with a three- to four-year land pipeline, a solid management team who will commit to staying on, profitability in the high-end of the range for their market and with a meaningful market share. Another reason for the fall-off is that, in many of the major markets, the large public builders have now re-established their market share since shuttering or shrinking their
Los Angeles Business Journal
Two prominent L.A. architecture and design firms are combining forces. Price Architects Inc. has joined HKS Architects, the firms announced July 15.

Price Architects projects includes the Los Angeles 8th & Figueroa residential tower, 3700 Wilshire Blvd., Discovery Business Center in Irvine and the Funko store in Hollywood. The company has a staff of 12, many of whom have previously worked for HKS.

HKS, a global firm with 1,400 employees in 23 locations, is working on the new National Football League stadium in Inglewood.

Jack Price, who heads up Price Architects, said he made the decision to join HKS because “serving clients on projects of scale and complexity is best done with a firm that can provide support.” He said being part of HKS will allow him more resources and the ability to work on more high-rise projects.

Price named the W Hollywood and The Century in Century City as his favorite projects he's been involved in.

The deal is a homecoming of sorts for Price, who previously worked for HKS for 30 years and has since collaborated with the firm on several projects.

“We have more opportunities for Jack's team to help than Jack's team can cover,” said Scott Hunter, a principal at HKS.

Hunter added that attracting talented people is a major priority for architecture firms now. “It’s an interesting time in architecture because there is such a demand for talent in the industry,” he said. “Part of our core business is finding talent and being able to grow.”

Price Architects is based at 5670 Wilshire Blvd. Its lease expires in 2020, at which time it will move into the HKS L.A. office at 10880 Wilshire Blvd. in Westwood.
Raysonho / Wikimedia Commons
Starboard Value LP, an AECOM investor that owns approximately 4% of the company's common stock, is calling on the board of directors to consider selling its construction services unit, according to a letter Peter Feld, Starboard's managing member, penned to AECOM Chairman and CEO Michael Burke this week.

The investment firm said AECOM's construction services unit has experienced earnings volatility and that it is subject to the risks of cost overruns and schedule delays.

A sale, Starboard said, would streamline the AECOM portfolio and allow investors and the company to focus more on the potential of its design and consulting business.

Overall, Starboard said, given AECOM's scale when compared to competitors, there's no reason it should not be able to compete with its peers on margins. In addition, the investment company said that AECOM should use Jacobs Engineering and its "turnaround" during the last several years as an operational model moving forward.

In a statement to Construction Dive, AECOM said, "We have taken and continue to take proactive steps from a position of strength to create meaningful shareholder value as demonstrated through our plan to spin-off our Management Services business into a standalone government services company; our already-executed $225 million margin-enhancing [general and administration expenses] reduction; ongoing review of margin improvement opportunities; our intent to exit all self-perform construction exposure by the end of the fiscal year; and stock repurchases under our $1 billion authorization." The company added that it values shareholder input and will review Starboard's letter.

AECOM announced last week that it was going to spin off its management services unit into a standalone company, which Starboard cited as an opportunity for it to suggest other changes.

It's not unusual for public companies like AECOM to have one or more activist investors try to force fundamental changes in the way the company operates.

Earlier this year, another AECOM investor, Engine Capital, tried to sway shareholders in the runup to the company's annual meeting by announcing it would vote "withhold" against current board members and a new executive compensation plan. Engine said executive pay at the company, particularity for Burke, who had by that time received almost $80 million in compensation, was too high given its substandard operating results in comparison to its peers. One of Engine's suggestions was to tie bonuses to long-term performance.

Shareholders ended up approving all of AECOM's board of directors' nominees and the proposed executive compensation resolution, voting yes as well on a revised employee stock purchase plan. ​
Pfau Long Architecture
The acquisition of the boutique San Francisco firm gives a local touch to the major practice

In a new merger, boutique firm Pfau Long Architecture is joining forces with the San Francisco office of Perkins+Will. Partners Peter Pfau and Dwight Long started their practice in 1991, and have enjoyed a friendly relationship with Greg Johnson, the managing director of Perkins+Will’s San Francisco studio. The combined efforts of the two firms enhance both parties’ assets when going after a range of projects in the area.

“Joining forces allows us to tap into Pfau Long’s design leadership, shaping the future of the work we do,” says Johnson, who cited a shared commitment to the Bay Area as a reason to combine the two studios. For Perkins+Will, Pfau and Long’s deep connections to the region and reputation with clients will be an asset, along with the firm’s experience designing K-12 schools. “Perkins+Will has a strong presence in K-12 on the East Coast,” says Johnson, “and the hope is that we can be more competitive with those projects on the West Coast as well.”

For founding principal Peter Pfau, the merger means access to a much larger team and enhanced resources. “There has been a natural progression since 1991, when we founded Pfau Long, as we built up the scale of the firm and the scale of work we were doing,” says Pfau. “We are now being considered for work on larger projects that we wouldn’t otherwise have the capacity to do.”

With the merger now active, Pfau Long's 26-person staff is in the process of joining Perkins+Will’s 68-person team in its Rincon Hill office. Both parties are eager to work together. Under the new arrangement, residential work will continue to be done under the Pfau Long name, and Johnson will remain the managing director of the combined operation. Pfau was named design director, and Long was appointed design principal of Perkins+Will’s San Francisco shop. Two other Pfau Long architects, Kami Kinkaid and Melanie Turner, were named the K-12 practice leader and director of residential design, respectively.

In a deal that clearly points to an important growth sector in the AEC industry, Harley Ellis Devereaux (HED) entered the market in data center design by merging with Integrated Design Group, an architecture, engineering, and planning firm with an established reputation in the field.

The leadership and staff of Integrated Design, also known as ID, from its offices in Boston and Dallas will join the HED team with locations in Chicago, Detroit, Los Angeles, San Diego, San Francisco, and Sacramento. The combined firm is now 420 strong.

Zweig Group, an AEC management advisory firm with offices in Dallas, Fayetteville, Houston, Salt Lake City, and Washington, D.C., represented the selling firm.

“The merger between HED and ID is a great match,” said Phil Keil, Zweig Group’s director of strategy consulting and the firm’s project manager on the deal. “ID’s thought leadership in the data center design space will be a valuable growth platform as HED continues to serve clients, especially in healthcare and higher education. This merger with ID also opens up a regional presence for HED in the important and growing markets of Boston and Dallas.”

According to Peter Devereaux, FAIA, chairman of HED, this is a natural step for the firm.

“We are committed to strategic growth that increases the firm’s ability to create positive impacts for our clients and their stakeholders,” he said. “Bringing the ID team into the HED family is a step on our journey toward expanding our expertise and enabling a greater impact for our clients. It also allows us to reach new audiences – both in this new market sector for HED and in all the sectors we serve in the regions surrounding Boston and Dallas.”

HED leadership recognizes that this is an important, fast-growing sector throughout the U.S. and beyond, and see this as a golden opportunity to get into the right sector at the right time.

“Many of our clients, in healthcare, higher education, and corporate work, for example, are seeking this intelligence and specialized expertise,” Devereaux said. “This is an example of our ability to bring additional resources and insight to the table for our clients.”
Jacuzzi Brands
European investment group Investindustrial has agreed to acquire Jacuzzi Brands from a group of investment funds affiliated with Apollo Global Management, Ares Management Corporation, and Clearlake Capital Group. Concurrent with the transaction, Investindustrial has invited design firm Nottingham Spirk Design Associates to serve as a partner in product design and business innovation, while also holding a minority share in Jacuzzi Brands.

The acquisition of the premium Italian spa manufacturer represents the first of its kind for Investindustrial, which in 2016 became the majority stakeholder of Arclinea through its current holding in B&B Italia. With nearly $8 billion in raised fund capital, Investindustrial had also previously invested in lighting brands Flos and Louis Poulson.

“Investindustrial’s success in supporting management teams and building premium brands will be crucial in consolidating our presence in North America and Europe and expanding into new markets,” says Charles Huebner, who has been designated by Investindustrial as the incoming executive chairman of Jacuzzi Brands. “Nottingham Spirk will help the company develop innovative new products that best meet consumer needs. Our new ownership will provide significant resources to invest behind our dealer partners with new marketing programs.”

While the acquisition transaction has not yet closed, Jacuzzi Brands CEO Bob Rowans is enthusiastic about the prospect. “I am extremely happy about the acquisition of Jacuzzi Brands by Investindustrial,” said Rowans. “Their expertise in growing premium brands, combined with the product development resources of Nottingham Spirk, makes this a perfect match to ensure a bright future for our valued customers and dedicated employees.”

Founded in 1956, Jacuzzi Brands generated approximately $500 million in revenues in fiscal year 2018, and boasts more than a million square feet of manufacturing space across eight production facilities in North America, Europe, and South America.
Design-builder Clayco, which was founded in St. Louis, has acquired Chicago design firm Lamar Johnson Collaborative (LJC).

LJC will become a branded business group within Clayco’s architecture and design practice. LJC President and CEO Lamar Johnson will serve in the leadership team of Clayco’s design business in an as-yet-unnamed role.

“While we’ve had an architectural practice that had over a hundred people in it, we really felt like we wanted to expand our design-build presence,” says Bob Clark, chairman and CEO of Clayco. “We decided to move our national headquarters to Chicago in 2013. Lamar is extremely well-respected both as a leader and design expert in the Chicago market.”

Clayco has been acquiring other companies to expand its design and construction business since moving to Chicago. Clayco acquired Bates Architecture last year and merged it with its in-house Forum design studio to create BatesForum. Clayco reported more than $2 billion in revenue in 2017 and topped ENR Midwest’s 2018 Top Contractors list.

“Lamar’s background and history in the business is, I think, iconic,” Clark says. “So we felt that having someone like Lamar actually as part of the overall leadership team in the organization, but also helping us specifically with the strategy in our architecture and engineering group, was a huge step in the right direction.”

The acquisition increases Clayco’s architecture and design professional staff to 225 in Chicago, St. Louis, San Francisco, Springfield, Mo., and Rogers, Ark. Terms of the deal were not disclosed. Clark says the company’s collaboration with Johnson and LJC on previous projects was a factor in making the acquisition.

“I think that’s one of the compelling reasons that we joined forces, is that it just seems to both of us that there’s so much inefficiency in the regular process, the normal [design-bid-build] process of architects doing their work,” Johnson says. “That whole system is, if it’s not broken, it’s not working very well, at the very least. This gives us an opportunity to refine that.”

LJC is both an architecture and interior designer. Former Gensler Chicago principal and managing principal Johnson launched the firm in 2017. LJC quickly built a reputation as both a disrupter and an innovator in the Chicago architecture community.

“We wanted the best and brightest that were available, and I was fort
Business Wire
Tetra Tech, Inc. (NASDAQ: TTEK) announced today that it has acquired Glumac, a leader in sustainable infrastructure design. The company has more than 300 employees and incorporates innovative sustainable technologies and solutions into each of its designs, including the design and engineering of Leadership in Energy and Environmental Design (LEED) standard and Net-Zero infrastructure.

“Our clients, now, more than ever, are looking for sustainable solutions to their infrastructure needs,” said Dan Batrack, Tetra Tech’s Chairman and CEO. “With the addition of Glumac, Tetra Tech can offer additional technically differentiated green infrastructure capabilities to our customers that not only conserve resources, but also reduce their operating costs.”

“We are very excited to join Tetra Tech,” said Steven Straus, Glumac’s President. “Tetra Tech complements our current services while offering more in-depth engineering capabilities and broader access to customers in new geographies. We look forward to continuing to provide our combined client base with industry-leading technical solutions.”

About Glumac (www.glumac.com)

Glumac specializes in cost-effective, sustainable design for all types of projects worldwide including sustainable design, building engineering, and energy analysis.

About Tetra Tech

Tetra Tech is a leading provider of consulting and engineering services differentiated by Leading with Science® in providing innovative technical solutions to our clients. We support global commercial and government clients focused on water, environment, infrastructure, resource management, energy, and international development. With 16,000 associates worldwide, Tetra Tech provides clear solutions to complex problems. For more information about Tetra Tech, please visit tetratech.com, follow us on Twitter (@TetraTech), or like us on Facebook.
The combination is expected to bolster HED’s presence in northern California and the K-12 sector.

Southfield, Mich.-based architectural firm Harley Ellis Devereaux (HED) is joining forces with Deems Lewis McKinley (DLM), a 57-year-old architecture and engineering services firm headquartered in San Franicisco.

The merger, whose terms were not disclosed, is expected to strengthen HED’s presence in the K-12 and Community Education markets, where DLM has established itself as a recognized leader. (Its tagline is “Improving Education through Design,” and 95% of its clients are educational institutions.)

Among its featured projects in that sector is the Bay Farm Elementary School in the Alameda (Calif.) Unified School District, whose eight-acre campus is surrounded on three sides by single-family residences, and adjoined by a five-acre city park. DLM also designed the new 44,000-sf Susan B. Anthony School in Daly City, Calif., which resembles a modern version of a red brick schoolhouse.

This merger expands HED’s presence in California’s Bay Area and Sacramento, DLM’s two primary markets. Prior to this agreement, HED had been managing its accounts and projects in Northern California mostly out of its office in Los Angeles, according to a company spokesperson. Next month, DLM’s staff in San Francisco will relocate to HED’s San Francisco office, which is currently being enlarged. DLM’s employees working out of its Sacramento office will stay there.

“We are looking forward to merging the talents of our two teams and are excited to be part of a very talented studio with deep resources,” says Wallace B. (Wally) Gordon, AIA, LEED AP, President and Chief Executive Officer of DLM, who is staying stay on with HED along with DLM’s principals and senior associates. The one person working in DLM’s office in San Diego—where the firm was founded—will now work from HED’s 20-person office in that city.

Prior to this agreement, HED had 380 employees working from offices in Chicago, Detroit, L.A., San Diego, and San Francisco.