International design, architecture, engineering and planning firm HOK has recently announced its plan to acquire 360 Architecture, a firm specializing in sports facility design. With HOK’s global influence and 360 Architecture’s expertise, the acquisition could bring about significant advances in sports facility design and expand the market reach for each firm. When it comes to the business of architecture, acquisitions such as this often enable large corporate firms to take on a wider variety of projects, giving them a competitive edge against famous designer names in the industry. But what else can we learn from the growth of the world's largest firms?
In recent years the number of corporate mergers has increased, with 2011 and 2012 setting domestic and international records for the industry according to A/E/C management consulting firm Morrissey Goodale. [5] This may suggest a growing trend in recent years for architecture firms to take advantage of mergers, acquisitions, and strategic partnerships to sustain growth in a volatile global economy and manage increasingly complex international projects. This trend may be further evidenced by the AIA Foresight Report for 2014, which states: “More than half of the respondents of the AIA Work-on-the-Boards survey felt that merger and acquisition activity among architecture firms would increase.” [1]
The practice of mergers and acquisitions has helped countless firms achieve growth and establish themselves in new markets. An early example of how successful this business practice can be was the Texas-based firm CRS, which grew from a two-person practice in 1946 to become the first architecture firm on the American Stock Exchange and the largest AEC company in the United States by 1985. CRS acquired interior design, construction, engineering, and consulting firms and expanded its project scope to begin working on infrastructure projects in Saudi Arabia by the 1960s. [6]
CRS also learned about some of pitfalls of architecture acquisitions, including how mergers can lead to culture clashes, and the loss of the unique identities of firms acquired in a merger. In a somewhat unfortunate turn of events, the firm’s business suffered with the 1982 collapse of the Saudi construction industry and the architecture group was sold to HOK along with the remainder of the company to Jacobs Engineering. [6] With this acquisition, what was once America’s largest architecture firm became a nameless addition to another corporate entity. This purchase by HOK was only one of many acquisitions that would help them to become one of the world’s largest architecture firms today.
Ever since its founding in St. Louis, Missouri in 1955, HOK has grown both organically and through the acquisition of numerous firms around the world. Prior to their most recent acquisition, HOK has retained 1,600 professional employees working in 23 offices across three continents. Similar to many other global practices, HOK’s rapid expansion was largely made possible through its partnerships with other firms and its aggressive movement into emerging markets.
And similar to many other large corporate firms, their ability to diversify their practice has helped them to survive the economic downturns that would force many of their smaller counterparts to downsize. When one considers that more than half of all new architecture in the next two decades will be built in the U.S. and China, a global presence becomes increasingly vital. [3] This strategy has been deployed by many of the largest architecture firms, whether or not their growth was through mergers and acquisitions.
AECOM is an example of a firm that initiated and sustained its growth predominantly through acquisitions of other firms. Up until 2009, the firm operated as a collection of design, engineering, and project management firms all working under their own names and without a unified identity. The new brand made its official debut in 2009 and has since operated in the planning and design development, transportation, energy, environmental, and water sectors. In the summer of 2010 alone, AECOM paid a total of about $1 billion to acquire smaller architecture firms and transition its focus from engineering to design. [2] Throughout its history AECOM has gradually positioned itself to take on an increasing demand for large and complex urban projects that require an integrated approach across multiple disciplines.
As many complex urban infrastructure projects are on the rise, the demand for integrated architecture practices is higher than ever before. Larger firms are often well equipped to handle today’s larger projects in the most efficient way possible. An example of one such project is the reconstruction work at the World Trade Center in New York. AECOM will oversee the engineering, site preparation, PATH facilities, security, and wayfinding systems for the new transportation hub and coordinate Santaigo Calatrava’s designs with the required infrastructure for the project. The programmatic complexity involved in this undertaking serves as an example the kind of project that could only be made possible through the coordinated efforts of large engineering and design practices.
The growth of practices such as HOK and AECOM stand in sharp contrast to the traditional idea of an architecture firm lead by a single creative genius. In their book entitled The CRS Team and the Business of Architecture, authors Jonathan King and Philip Langdon state, “Nor was CRS a 'form giver.' It was not a Le Corbusier or a Frank Lloyd Wright or a Louis Kahn. But the need for form givers is limited…The firm knew how to organize and gear up for a mass society that required large numbers of well-designed but not overly expensive buildings quickly." [4]
This description seems to aptly describe how many of today’s corporate firms fit into the world of architecture. There are still plenty of firms such as Zaha Hadid Architects and Foster & Partners that take their name from an iconic individual, but one must also remember that even these firms employ hundreds of professionals to carry out their work. Sometimes these design-based firms will also employ the engineering and project management services of larger corporate firms, such as Zaha Hadid Architects collaboration with AECOM for the design of the 2022 Qatar World Cup Stadium. Despite these collaborative efforts, the work of many corporate firms is less about delivering iconic design, and more about delivering functional buildings that can most efficiently meet a client's needs.
Architecture will always be a collaborative effort between design architects, interior designers, engineers, and numerous other consultants. When it comes to major urban development projects, the number of parties involved is even greater. In order to take on larger projects, global firms are increasingly expanding their reach through mergers and acquisitions. Rather than relying on the “brand name” appeal of a specific architect, larger firms may choose to market themselves based on their ability to take on any type of project. This capability is made possible by acquiring firms with a range of specialties and operating under a single corporate identity. Whether or not we will see greater numbers of mergers and acquisitions in the future, there will always be a need for large corporate firms to take on today’s most demanding urban projects.
References:
- AIA Foresight Report: The Changing Context, Business and Practice of Architecture 2014
- Hughes, C.J., Merger Mania
- Ikenson, Ben, Gensler's Secret Sauce
- King, Jonathan, and Philip Langdon. The CRS Team and the Business of Architecture. College Station: Texas A & M UP, 2002, p. 266.
- Morrisey Goodale, 2013 M&A RECAP: A/E M&A Activity Pumps The Brakes
- Novitski, B.J., What’s fueling the firm mergers and acquisitions trend? Growth.
