Accounts of mergers and acquisition activity in the technology sector recently have had a breathless quality.
“Groupon refuses Google’s $6 billion offer!”
“Facebook offered to buy Twitter for $500 million in 2008!”
There’s a certain fascination in watching companies less than a decade old race and chase, wheel and deal. Plus, the nosebleed valuations attached to them often seem like misprints.
In the much quieter professional-services arena, deals can take years to percolate, and when word of them surfaces they rarely poke the public consciousness. That’s because accounting, engineering, and law firms don’t rate highly on the fun meter.
To hear C.R. “Chuck” Pennoni tell it, there is only one reason for one engineering firm to acquire another: to serve clients better.
On Monday, West Philadelphia-based Pennoni Associates Inc. announced that it had acquired Patton Harris Rust & Associates, a smaller engineering firm based in Chantilly, Va. To put it another way, a 44-year-old firm (Pennoni Associates) absorbed a 58-year-old firm (Patton Harris Rust).
In an interview, Pennoni, who founded his firm in March 1966, declined to divulge the purchase price. But he was clear that this was a deal first and foremost about client service and second about expanding Pennoni Associates geographically.
“Our business is all about people,” said Pennoni, referring to both the talent on staff and the clients for whom they design and plan infrastructure projects.
The transaction adds seven offices in Maryland and Virginia and 175 employees to the 21 offices in eight states and 775 employees Pennoni Associates had had previously.
When it comes to expansion, Pennoni Associates stays close to its base in the Northeastern United States. “We don’t like to go far away,” Pennoni said.
And since clients value legacy names, Patton Harris Rust will retain its name for quite some time, Pennoni said.
Privately held though it may be, Pennoni Associates isn’t totally opaque when it comes to financials. It was No. 4,341 on the 2010 Inc. 5000 list of the fastest-growing privately held companies with a four-year revenue growth of 23 percent. Its 2009 revenues were $94.1 million, according to that annual Inc. magazine project.
Patton Harris Rust is one of the largest of the 10 or so companies Pennoni Associates has acquired over the years, Pennoni said. The firm is far bigger than another that Pennoni Associates acquired last fall - Design Consultants Group L.L.C., a Milton, Del., firm with seven employees.
The acquisitions will likely raise Pennoni Associates’ ranking on a list compiled by Engineering News-Record, a McGraw-Hill publication, that is much-anticipated in the design community. Last April, ENR ranked Pennoni Associates at No. 115 among the Top 500 Design Firms in the United States, up from No. 131 the previous year. On that same list, Patton Harris Rust was ranked at No. 432.
Even with projected 2011 revenues of $115 million, Pennoni Associates is battling to stay competitive in a “very soft economy right now,” Pennoni said.
Where once his firm might have bid for a public-works job against five or six other firms, it now routinely competes with 20 to 30 firms for the same work.
“We have to be very competitive with our abilities and our pricing,” Pennoni said.
Pennoni views economic conditions as having bottomed out and says he sees few signs of recovery. Rather, he continues to sense a lack of urgency over deteriorating infrastructure in the United States. “We can’t continue to let our water mains break, highways crumble, and bridges collapse,” he said.
He said he realized that sounds “self-serving” coming from a company that would benefit from increased infrastructure spending. But for all the hype over “shovel-ready” projects being funded by the $814 billion federal economic stimulus package, Pennoni said more money went to repairing “social infrastructure” than physical infrastructure.
It’s hard to see that emphasis changing in 2011 with all of the dire predictions of fiscal stress for most states and far more concern about bottlenecks on Twitter than the Schuylkill Expressway.