Learn more about the Harris Williams senior professionals featured in this article.

Key Learnings

• Well-established trends within the engineering sector are bolstering investor participation in the space.

• As these trends persist, investors will continue to look for creative opportunities to deploy capital into the sector, which will help sustain its strong pace of M&A activity.

• Recent Harris Williams engineering services engagements underscore strong buyer interest across the space and highlight some of its compelling value-creation opportunities.

In recent years, the fragmented and recession-resilient engineering sector has experienced accelerating investor interest, particularly among the private equity community. Powerful tailwinds, such as the infrastructure bill rollout, ongoing energy transition, and expansion of 5G, are propelling private equity participation and a valuation uplift across the sector.

Here, our senior professionals share the key trends driving burgeoning investor appeal throughout engineering services, and recent Harris Williams transactions exemplifying sought-after company characteristics.

Market Trends Underpinning Sector Growth

Multiple attractive tailwinds continue to propel the engineering sector, leading to a sharp increase in investor interest in recent years.

For a deep dive into these and other trends, as well as a detailed look at the sector's M&A landscape, download our latest Engineering Services Market Report.

The State of U.S. Infrastructure

Across the U.S., bridges, roads, water plants, and other key components of the country’s infrastructure need repair, replacement, and upgrading. The regular upkeep of these essential assets is driving non-discretionary and long-term demand for engineering companies that specialize in their maintenance.

Tied to the state of U.S. infrastructure is the rollout of the infrastructure bill, which is creating more jobs for businesses that plan, design, and work on upgraded infrastructure. “As private equity firms consider ways to deploy capital in the current market, America’s massive infrastructure bill provides investors with greater confidence in engineering assets,” says Spitzer. “The bill’s funding, coupled with the Inflation Reduction Act, means a long runway for elevated spending and sustainable demand throughout the sector going forward,” he continues.

Energy Transition & ESG

The energy transition is another major trend generating investor activity in the engineering services sector. “As innovative infrastructure is built around new and more efficient energy sources, it will require connectivity and a fundamental shift in how it operates,” notes White. He explains that this includes putting renewables online that must be connected to the existing power grid, hardening and redesigning existing power grids, and implementing electric vehicle charging station infrastructure to support increasing EV adoption.

Meanwhile, a rising focus on ESG and sustainability is creating an expanding set of opportunities for engineering businesses. For example, companies focused on the efficiency of buildings are redesigning floor plans for cost-effective lighting, automated light switches, and other key components of economical energy output.

“With private equity groups targeting more ESG-aligned investment opportunities, engineering companies with an established dedication to sustainability can gain visibility in the marketplace and drive premium valuations,” points out Lewis.

Telecom & 5G

In addition, the 5G rollout within telecom is a compelling theme across engineering services with high-speed broadband and internet access becoming increasingly crucial for both business and residential use. “To meet rising wireless needs, the expansion of 5G has accelerated to offer greater speed, capacity, and reliability,” says Waller.

Establishing these highly desirable 5G capabilities entails building telecom infrastructure in the form of towers and underground fiber installation. “In turn, that’s bolstering demand for companies specializing in these sought-after services,” he adds.

Market Consolidation

These trends, as well as high fragmentation throughout engineering services, are leading to rapid consolidation in the sector as operators seek to round out their service mix and expand their geographic footprints to enhance their competitive positioning.

At the same time, the sector’s favorable long-term growth outlook is driving an uptick in private equity-backed transaction volumes across all pockets of the market. “The fragmented landscape provides a substantial opportunity to enter or expand within the sector, and we expect M&A activity to remain strong in the coming years,” says Spitzer.

Rising Pace and Scale of M&A

As evidenced by recent Harris Williams transactions within engineering services, powerful trends continue to drive interest for differentiated businesses. Both private equity investors and existing businesses in the sector are looking to capitalize on engineering’s long-term growth potential, and prioritizing businesses with compelling ways to deliver value to their clients or build scale through accretive M&A. As these trends continue, the pace and scale of M&A across the sector should both increase, leading to significant value-creation opportunities.

To discuss M&A opportunities across the engineering sector, please contact our senior bankers.