The environmental consultancy sector is going through an unprecedented flurry of merger and acquisition activity
The global environmental and engineering consulting industry reached “unprecedented consolidation” in 2014, according to figures from the Environmental Financial Consulting Group (EFCG).
As reported by presented by market research firm Environment Analyst, total merger and acquisition activities in the sector accounted for some $25bn (£17bn) in revenues, a twelve-fold increase from 2013.
Last year also saw the largest single deal in the history of the sector, with Los Angeles-based AECOM acquiring London-based URS for $6bn.
The transaction created a “super-sized company”, which employs 100,000 staff worldwide and generates approximately $20bn in turnover, notes EFCG.
A number of factors drove the consolidation trend, the research company indicates. These include lack of internal growth, which pushed some of the largest companies to make strategic deals to improve their financial performance.
Another factor was the desire to tap into new markets and increase diversification in order to reduce risks of overexposure to one particular sector.
Consultancies have also sought to expand their global footprint with acquisitions in different geographies.
Another driver was the need to enlarge to be more competitive in public tenders and to benefit from economies of scale.
However, as the sector consolidates, analysts have questioned whether “bigger is indeed better”, with some pointing out that smaller firms could be better positioned to satisfy the needs of large and demanding clients.
Efficiency was nonetheless seen as the key to success. “Firms that are inefficient, no matter how big they are, will likely go the way of the dinosaur, given the competitive nature of our industry,” argues EFCG.