Deep work backlogs, multiyear contracts, and a workforce capable of working from home make for an attractive middle market opportunity, says Godspeed Capital founder and managing partner Douglas Lake. “The engineering consulting market has come out of the gate strong during this recovery,” he says, pointing to tailwinds including the recently passed infrastructure package. Let’s delve into the sector’s prospects.
Nestle’s industrial expansion in Georgia, Delta Airlines’ renewed capital expenditure plans and Amazon’s Cincinnati transportation hub are just a few private sector projects creating backlogs for engineering and consulting firms. Add state and local governments seeing unexpected tax revenue due to demographic shifts, and construction-adjacent industries have a strong pipeline.
Godspeed targets firms with $5 to $30 million in earnings before interest, taxes, depreciation, and amortization. The play is typically to create a business development team to increase contract bids, and to implement recruiting efforts to support the work the additional business creates.
“The opportunity for Godspeed as an impactful partner when teaming up with these groups is to accommodate their objectives,” Lake says. “We’re looking for them to buy in with us. But we’re trying to help them think more strategically farther out over the horizon, five years or longer. The strategy is now to reinvest in the business.”
The lower middle market private equity firm is executing on its strategy to roll up engineering and design companies in the Southeast U.S.
Godspeed announced the acquisition of Ascent Engineering Group last month. The firm’s markets face the very same customers thought to represent opportunistic markets: Ascent’s mechanical, plumbing and electrical system designs target K-12, healthcare and government clients. The deal comes after similar acquisitions in Richmond, Virginia and Atlanta, Georgia.