Motives for acquisitions among engineering consulting firms

Many empirical studies across various industry sectors show a high failure rate of mergers and acquisitions (M&A), suggesting that this instrument of corporate development is rather risky. Since engineering consulting firms usually have a low tangible asset base as well as good educated and highly mobile professionals, carrying out an M&A transaction in this particular service sector creates an even higher risk. It is evident from the relevant construction and engineering literature that a large number of engineering consulting firms engage in M&A for their corporate development. Owing to the uniqueness of that service sector combined with the high failure rate of M&A, a survey among the top 100 engineering consulting firms in Europe was conducted to investigate the motives behind M&A transactions. Findings suggest that diversification into new service/client markets as well as the penetration into new geographic markets were the most important motives. Further, increasing the firm's market share and the acceleration of growth were the next most popularly rated motives, while tax reasons or spending the firm's excess cash were both seen as relatively unimportant motives. The results show that - compared to other industry sectors - engineering consulting firms had some very different motives or another emphasis was placed on those motives when conducting an M&A transaction. Results also show that some motives were just as important for engineering consulting firms as for firms of other industry sectors, for example the increase of market share or the acceleration of firm growth.