Engineering: Five Priority Segments for M&A

The aging and increasingly complex electrical grid requires significant spending for continual upgrade and maintenance work, leading to higher demand for engineering firms focused on the segment. 

“Due to rapid growth in electrification, the transition to renewable energy, and a greater desire for connectivity, it’s become more critical to enhance grid resiliency, capacity, and durability,” explains Drew Spitzer, a managing director. “Critical grid upgrades will create significant demand for engineering services to support modernization, expansion, and resilience efforts within the ecosystem.” 

Investors are seeking creative ways to capitalize on this favorable demand outlook for the utility and power sectors. “Engineering firms with power delivery expertise will be highly sought after as this landscape continues to evolve,” he adds.

Prolonged underinvestment in water and wastewater infrastructure is creating a non-discretionary, long-term need for engineering companies that specialize in water-related infrastructure. The latest U.S. infrastructure bill allocates more than $50 billion to support water and wastewater infrastructure maintenance, but even with that contribution, the funding gap is significant. Long-term demand for engineering services in the sector will remain elevated for the foreseeable future. 

At the same time, municipalities and utilities are outsourcing more non-core services, including water and wastewater services. And with regulatory regimes and compliance standards becoming more stringent, complicated water and wastewater regulations are being more strictly enforced. 

“There’s a long runway for increased spending and sustainable demand within the water and wastewater engineering sector,” says Greg Waller, a managing director. “Because of the criticality associated with water and wastewater infrastructure, the work to maintain and upgrade it is highly resilient and will continue to drive high demand for engineering solutions.”

Environmental engineering and consulting firms are increasingly attractive to investors due to their critical role in navigating complex regulations and addressing corporate sustainability goals. 

For instance, these firms help both public and private organizations comply with foundational legislative acts like the Clean Air Act and Clean Water Act, which remain cornerstones of environmental regulation in the U.S. Beyond federal mandates, state and local governments often impose additional regulations that require local market expertise to ensure compliance at multiple governmental levels. 

Many corporations, meanwhile, have internal sustainability policies that function alongside government requirements. Environmental engineering and consulting businesses are essential partners in helping corporations align their operations with these objectives, mitigating risks associated with fluctuating political and regulatory landscapes. 

“These factors create a stable market for environmental engineering and consulting demand,” says Luke Semple, a managing director. “This category’s resilience, innovation, and steady demand outlook position these firms as critical partners in an increasingly complex regulatory landscape.”

Similarly, infrastructure across America’s expansive, aging, and increasingly complex roadway network also requires regular upkeep and enhancements. 

To support these efforts, public entities draw from a diverse range of sources that collectively provide resilient and predictable funding year after year. On top of those existing funding sources, the U.S. infrastructure bill allocates significant dollars to the modernization of transportation infrastructure. 

“Engineering services are the essential first step to ensure resiliency and functionality throughout the country’s vast network of transportation assets,” says Matt White, a managing director. “Going forward, there will be substantial value-creation potential for engineering firms that can meet demand and build scale as transportation infrastructure is revitalized, strengthened, and expanded.”

The expansion, retrofit, and upgrade of critical facilities—such as data centers, advanced manufacturing, healthcare and life sciences, and aviation—is a significant growth driver for engineering firms.  

Investors in the sector are seeking to capitalize on several compelling trends, including the proliferation of AI, the electrification of everything, energy efficiency initiatives, and computing and manufacturing onshoring initiatives, among others. 

“Critical facilities are evolving rapidly, and engineering firms with specific expertise in this corner of the market are well positioned,” says Waller. “We expect this heightened demand to continue and M&A activity in the space to remain strong.”