By Richard Massey

Backlogs the size of GDPs. Workforces the size of armies. The ability to mine the earth, pierce the sky, and reconfigure entire cities. They go nuclear, drill for oil, and build sprawling farms for renewables. From California to China, and from Copenhagen to Cape Town, their reach is everywhere. They are behemoths, global superpowers fueled by talent and technology. While specialties and names vary, they can all do the same thing — shake the money tree — and they all go by the same moniker, that of mega-firm.

While the notion of the mega-firm is nothing new, it is also true that in the last couple of years the big have gotten bigger, the small have found their niches, and the middle has shrunk. It’s an issue of talent acquisition, shareholder appeasement, risk flattening, services delivery and, as it pertains to the U.S. market, the expectation that a massive infrastructure bill is on the way, say those who follow the industry.

But how will it all shake out? In the wake of Jacobs Engineering’s $3.2 billion acquisition of CH2M, SNC-Lavalin Inc.’s $2.6 billion acquisition of WS Atkins PLC, and a glut of mergers earlier this year and in 2016, the question looms: Are there more mega-mergers out there?

Maybe. Or maybe not.

Nelson Ogunshakin, DSc., chief executive of the London-based Association for Consultancy and Engineering (, said there are plenty of factors out there that could spark, or dampen, future deals at the highest level.

“We did expect a continued upward trend in mega-mergers, but not at the level that has been experienced,” Ogunshakin said in an email interview with Civil +Structural Engineer. “It’s very difficult to predict, but in general, the supply and demand coupled with the availability of capital will dictate the direction of travel in the near future.”

One thing is certain: Shareholders like it when titans join forces.

“For investors, these mega-mergers are a great opportunity to invest in a cash-generating and profitable business with secured pipelines for future earnings, due to global growth in investment in both property and infrastructure systems,” Ogunshakin said.

In early August, Jacobs announced the $3.2 billion acquisition of CH2M, a move that Jacobs said would give the firm an advantage as it seeks to expand in the sectors of Water, Transportation, and Environmental & Nuclear. The announcement was not a surprise to the industry, as advanced news reports speculated that the merger was in the works. But what might have raised a few eyebrows was the price — Jacobs paid a premium for CH2M, reportedly $88.08 per share when it was valued at $50.69

But it appears to be worth it. On the back end of the merger, the combined company emerges with an astounding set of numbers — more than 70,000 employees worldwide, annual revenue of $15 billion, a backlog of $27 billion, and annual cost synergies of $150 million.

Heading into the merger, however, CH2M wasn’t exactly basking in its golden era. Legal woes and associated fees, ineffective internal controls, project losses, credit and cash-flow problems, uncertainty over the fate of government contracts, competition from other firms, brain-drain, concerns over merger and acquisition activity, and diminished internal control due to a $300 million Series A Preferred Stock sale in 2015 to Apollo Global Management, LLC, were all front and center as the firm entered 2017, according to its 2016 annual report filed with the U.S. Securities and Exchange Commission.

Perhaps the biggest issues dogging the firm were major losses racked up from 2014 through 2016. According to the 2016 SEC filing, during the three-year period, CH2M lost $253 million due to cost overruns on a toll road in Austin, Texas.

Other catastrophic losses occurred in 2014 and 2016, when, due to the implosion of a joint venture to construct a power plant for a natural gas facility in northern Australia, CH2M took a combined $294 million hit, according to the SEC filing.

Even as it faced trials, however, CH2M remained a ripe cherry to pick. In its SEC filing, the firm listed its revenue streams, with 42.3 percent coming from Environment & Nuclear, 22.7 percent from Water — a key item on Jacobs’ wish list — 17.8 percent from Transportation, 16.4 percent from Energy & Industrial, and 0.8 percent from Power EPC.

Clients included multiple public-sector agencies from the United States and the UK, the Qatar Public Works Authority, the Canadian Nuclear Laboratories, and numerous private-sector clients across the industrial spectrum — refiners, chemicals, pharmaceuticals, aerospace, seaports, airports, universities, renewables, and manufacturing. The firm ranked No. 1 or near the top in a couple of dozen categories, according to Engineering News Record.

And what made CH2M such a dynamic and attractive firm? Its people, says Will Schnier, CEO of Austin, Texas-based BIG RED DOG Engineering|Consulting.

“Scale matters,” said Schnier, in a phone interview with Civil + Structural Engineer. “And talent matters. This is really a talent acquisition proposition. It’s more than an equation for the shareholders. Jacobs might be more excited about the people they got than the revenue they got.”

For Schnier, there are three big drivers for mega-mergers: the talent crunch, the pending infrastructure bill, and the necessity of inorganic growth.

“They have to show growth to shareholders and it can’t be done organically,” he said. “The only way to do that is to buy big firms.”

While the specter of a mega-firm operating in his own back yard — last year Jacobs relocated its world headquarters to Dallas, where BIG RED DOG has an office — might be cause for concern, Schnier says there is nothing to fear.

“[Mega-firms] have the experience, but not the horsepower on the ground,” Schnier said, referring to local knowledge of neighborhoods, politicians, governments, and environmental standards. “They frequently team with local firms and do not keep all the revenue. I do see more sub-consulting opportunities with the big firms. We need a big firm like Jacobs to shake the money tree. I don’t think they are a threat to us.”

As Jacobs makes its move, so do other firms. Engineering giant AECOM, based in Los Angeles, in May announced its plans to hire as many as 3,000 workers to support its North American infrastructure operations, in anticipation of a $1 trillion infrastructure bill from Congress. And in July, Korean heavyweight HanmiGlobal, through its American subsidiary, OTAK, acquired Denver-based Loris and Associates. In the press release announcing the move, HanmiGlobal chairman Kim Jong-hoon said the acquisition was made to gain an “advantage in the Trump administration’s infrastructure construction market.”   

Jacobs, of course, is no stranger to acquisitions, as it is at the core of the firm’s growth strategy. Just since 2011, Jacobs has absorbed an assortment of firms across the United States and the world, including in China, South Africa, India, Australia, Brazil, UK, Michigan, Maryland, Illinois, Georgia, California, Texas, Philadelphia, and Virginia.    

In an earnings call right after the CH2M merger was announced, Steven Demetriou, Jacobs’ president and CEO, sounded a note of confidence and optimism.

“The complementary capabilities of our two great companies will create an ideal mix of talent and expertise and builds on our common cultures and shared values,” he told investors. “CH2M further supports our profitable growth agenda and better positions us to deliver on a strategic blueprint and drive more profitable growth across our business. Most importantly, we expect the combined company to drive significant financial benefits and enhance shareholder value.”

Demetriou, with a background that includes a 16-year stint at ExxonMobil, told investors that the integration process between Jacobs and CH2M will be a key focus and will have plenty of resources to make it as seamless as possible. The firm hired “an external world-leading consulting firm with significant transformational integration experience” to ensure a successful merger. Demetriou himself is a member of the Integration Management Office.

Among the many experts following the Jacobs acquisition was Andrew Wittmann, a senior research analyst at Robert W. Baird & Co., a mid-market investment firm based in Milwaukee. That Jacobs acquired another firm was standard, but acquiring one with an $8.3 billion backlog was something new.

“Jacobs has always been an acquisitive company, this just happens to be their largest one,” Wittmann said.

For Jacobs, the merger had a lot to do with flattening risk and increasing returns by fleshing out its considerable suite of services. In that regard, CH2M was the perfect fit.

“The CH2M business lines match up with what Jacobs is trying to do,” Wittmann said.

And while Wittmann said it would be difficult for Jacobs to become any more competitive than it already was, the merger does deepen the firm’s bench.

“If there is one area where the firm could see a big upside, it’s with Water,” Wittmann said. “They never had a pillar of strength there. This will plug that hole in a material way.”

The writing was on the wall in 2015 and 2016 when CH2M took a combined $300 million equity investment from Apollo. According to CH2M’s filing with the SEC, Apollo’s equity share represented 17 percent of the voting rights of the common stock, giving the investment company “the ability to influence the outcome of any matter submitted for the vote of our stockholders.”

Still a blue-chip firm by any estimation, something had to give with CH2M.

“They were going through a lot,” Wittmann said, referencing the Texas toll road, and the Australian power plant. “They needed that cash [from Apollo] because they had projects that were over budget. They were in a position where they had to confront the needs of their shareholders. They had to do something and this made sense.”

In the end, it worked out well for those who owned stock in CH2M.

“This is a good deal,” Wittmann said. “If you are a shareholder in CH2M, you should be very happy.”


SNC-Lavalin going nuclear

In July, another blockbuster deal was announced — Canada-based SNC-Lavalin Group Inc.’s $2.6 billion acquisition of WS Atkins PLC, based in the UK. The all-cash transaction resulted in a juggernaut with a combined annual revenue of $9.6 billion and a global workforce of more than 50,000.

To make the purchase, SNC-Lavalin used creative financing. In addition to credit, an equity deal, and a public offering, the firm secured a $1.2 billion loan from La Caisse — a pension fund — using proceeds from a 16.7-percent interest in a toll road in Toronto.

In an interview with the Canada-based Financial Post, Neil Bruce, president and CEO of SNC-Lavalin, said the firm is offloading as much as an 80-percent interest in mature Canadian infrastructure assets, a move that would unleash capital for new projects and bolt-on acquisitions. The Financial Post also reported that the Atkins acquisition will give SNC-Lavalin a leg up in the ongoing development of AI and machine learning.

As did Jacobs in the CH2M deal, SNC-Lavalin paid a premium — 35.1 percent hike on Atkins’ closing price as of March 31, according to Reuters. Looking ahead to the expected windfall for power and transportation grids, particularly in the United States, SNC-Lavalin said the merger “uniquely positions the combined entity to capitalize on the significant investment in infrastructure projects globally, but principally North America.”

Among other things, SNC-Lavalin also said the merger “positions the combined entity to win wider nuclear work.” There’s no surprises there. Atkins, established in 1938 in London by Sir William Atkins, is known as a nuclear power. Nuclear is its largest source of revenue in its energy division — 47 percent — and is only expected to increase in the future. Citing facilities operations, decommissioning, and development, Atkins made this pronouncement in its 2016 Annual Report: “Our skills are in high demand across the entire nuclear life cycle. We have a robust, broad-based nuclear portfolio that is performing well.”

All mergers include synergies — areas where the combined firm can eliminate duplication to achieve savings. In the SNC-Lavalin-Atkins deal, that is certainly the case. The merger is expected to produce about $96 million by the end of the first year. While the bulk of the synergies will occur in real estate, it’s certain that at least some jobs will be lost.

Job losses are to be expected with any merger. On top of that, there is the added dimension that some employees just won’t want to remain at the new company. But that’s when smaller firms can pick up the pieces. Speaking to the typical aftermath of a merger, Nelson Ogunshakin, DSc., chief executive of the London-based Association for Consultancy and Engineering, said, “There is an opportunity for small to midsized enterprises to provide homes for disfranchised staff, offer specialist services to a different class of clients, take advantage of their agility to respond to different needs, and sometimes offer sub-consultancy services to the very large practices.”

Atkins was not the only major UK firm this year that cycled through an M&A deal. Shortly before SNC-Lavalin-Atkins, UK-based oil and gas giant John Wood Group PLC acquired competing UK oil and gas firm Amec Foster Wheeler PLC for $2.7 billion. While it’s tempting to reference Brexit — the UK’s June 2016 decision to vacate the European Union — Ogunshakin said any linkage is erroneous.

“I do not believe Brexit is a major driver for some of the most recent deals,” Ogunshakin said. “The key drivers were the need to diversify business portfolios, gain a wider geographical footprint, open opportunity for synergy, increase demand for bigger balance sheets, ownership transition or succession, as well as the availability of investable pension and private equity capital.”


Recent mega-mergers



Deal value: $3.2B

Combined manpower: 74,000

Combined revenue: $15B

Backlog: $27B


SNC-Lavalin/WS Atkins plc

Deal value: $2.6B

Combined manpower: 53,000

Combined revenue: $12B

Backlog: $11B


John Wood Group PLC/AMEC Foster Wheeler

Deal value: $2.7B

Combined manpower: 64,000

Combined revenue: $11.8B

Backlog: $11.6B*

*Figure based on Continuing Operations for JWG, and Order Book for AFW.


Xinjiang Dushanzi Tianli High & New Tech CO Ltd/China National Petroleum Corp-Assets

Deal value: $4.1B


SOURCE: Annual reports and press releases from the firms; PWC, Global Engineering and Construction M&A Deals Insights Q2 2017


2017 M&A Trends

60 percent: Firms have acquisitions as part of strategy

79 percent: Firms over $1B in revenue have acquisitions as part of strategy

83 percent: Firms outside the US looking to enter US market through acquisition


On a scale of 1 to 10:

7.1: Pursuing small strategic deals (bolt-on, branch office, local competitor)

6.9: Expanding into new geographic markets

7.1: Failure to integrate is a problem for M&A

7.4: Seller expectations affect valuation

8.7: Target company’s leadership team critical to M&A success

8.7: Integration plan is critical to success


SOURCE: FMI Capital Advisors, Inc., 2017 M&A Trends for Engineering and Construction