Author(s): Terry Ruhl Infradevco
Analyses of mergers and acquisitions (M&A) across industries are prevalent in the literature. And, while professional service firms (PSFs) clearly operate differently as compared to other domains, is the strategy for successful M&A unique to that industry? The research herein provides a model framework for alternative growth strategies and the accommodating antecedents to successful M&A for PSFs, using a specific focus on the architecture/engineering (A/E) industry. Here, talent acquisition and top-line growth through market, service area, geographic, and client complementarity, along with prudent levels of diversification, provide opportunities for firm differentiation, enhanced reputation, and greater shareholder value. However, perhaps the largest driver to the upsurge of M&A activity, not covered in the scientific literature, results from the positive outcomes to both sides of the buyer-seller dyad, through the exchange in price-to-earnings ratios. And, while PSFs have been known to look to diversification strategies as a primary growth driver, A/E PSFs should strive for building on complementary capabilities, using a “simpler is better” approach. Firms need to exercise caution against complex diversification strategies and plans that include significant overlap between firms or stretch the capabilities of senior leadership.