Architecture, Engineering & Construction (AEC) Services Sector M&A Update – March 2026

AEC Services Sector M&A Valuations Strengthen Amid Surging Private Equity Activity

Merger and acquisition (M&A) activity accelerated in the Architecture, Engineering & Construction (AEC) Services sector during 2025, buoyed by private equity’s (PE) sustained appetite for sector businesses and their exposure to hot pockets in the market. Strong backlogs and durable margins in 2025 kept AEC acquisition activity intact despite tariff-based input cost inflation that hindered construction planning. Data center and power infrastructure development projects continued to break ground despite macroeconomic volatility, fueled by demand for cloud computing and artificial intelligence (AI) technologies. In a sector largely dominated by private, localized, and employee-owned businesses, PE’s increased penetration saw M&A bidding wars between buyers accelerate. This competitive environment is poised to accelerate through 2026 as buyers intensify their pursuit of high‑quality targets, providing a strong tailwind for AEC business owners looking to explore a liquidity event or partial sale.

AI-Driven Demand for Data Center Projects and Energy Efficiency Services Grows

Durable project backlogs uplifted AEC Services sector performance in 2025 despite stalled growth in overall construction spending. Engineering backlogs remained strong, with the lion’s share (48%) of firms reporting a workload pipeline of one or more years, according to the American Council of Engineering Companies’ (ACEC) Q4 2025 sentiment report.¹ This momentum is expected to persist into 2026 as nearly half (47%) of surveyed engineers expect firm finances to remain strong and 43% anticipate even higher backlogs in the next 12-month period, underpinned by strong demand across high-growth end markets. Architecture and design backlogs also remained steady—averaging a 6.3-month pipeline as of December 2025—but architects reported continued weakness in new design contract inquiries, according to the American Institute of Architects’ (AIA) Architecture Billings Index (ABI) report.² The drop off in new design contracts, coupled with a full year of declining firm billings, will likely limit architecture firm project backlog growth throughout 2026. This slowdown largely stemmed from stalled construction spending, which contracted 1.4% year-over-year (YOY) through the end of October 2025, according to the U.S. Census Bureau.³ Broader construction spending will likely remain muted in 2026 as macroeconomic uncertainty and tariff-based input cost inflation continues to hinder construction planning progress across most end markets.

The Data Center and Energy sectors are expected to remain in high demand as the AI race continues to heat up despite facing a challenged construction spending backdrop. Data center construction spending has nearly doubled each year since 2021, driven by the rapid development and commercialization of AI technologies, according to a January 2026 ConstructConnect report.⁴ The high energy demands associated with this data center buildout have increasingly strained power generation capacity across most U.S. grid systems. In 2025, data centers required 22.4% more gigawatts (GW) of power than in 2024, with energy demand requirements slated to nearly triple by 2030, according to S&P Global.⁵ This booming growth has underscored rising demand for energy efficiency engineering services as many hyperscalers and data center operators have sought to reduce expanding energy costs. In addition to rising energy demand, construction planning processes have increasingly prioritized investments in resilient, durable, and energy-efficient infrastructure to meet policy mandates, corporate sustainability goals, and mitigate the disruptive impacts of climate-related disasters. As a result, sector participants serving the Data Center and Energy end markets, as well as those providing energy-efficiency services, have generated outsized M&A attention. Of note, multidisciplinary engineering firm VCA Consultants acquired sustainability consulting, construction, and engineering firm Green Econome (November 2025, undisclosed). Green Econome’s services focus on energy and water efficiency, helping clients reduce operating costs and overhaul building systems to meet sustainability and environmental, social, and governance (ESG) goals. The deal expands VCA’s services—which are largely centered around new construction—to now include Green Econome’s wide range of capabilities for customers looking to retrofit existing buildings’ systems for more efficient power consumption. Capstone expects investor interest in sector participants offering energy‑efficiency services to further strengthen as buyers seek exposure to the durable, long‑term tailwinds driving demand for these capabilities.

Investor interest in the AEC Services sector remains exceptionally strong, driven by sustained demand across energy, data centers, transportation, and critical infrastructure projects. As competition intensifies—especially among private equity buyers—valuations continue to favor sellers. This environment presents an ideal moment for owners to explore strategic options and position their businesses for long term growth.

Crista GilmoreManaging Director, Capstone Partners

AEC Services Sector M&A Activity Accelerates, Valuation Competition Grows

AEC Services sector M&A volume expanded in 2025, supported by attractive dynamics across high-growth end markets that continued to drive rising PE interest in the sector. Deal volume totaled 361 transactions announced or completed in 2025, marking a 10.1% increase YOY. PE transactions drove this jump, rising 32.7% YOY, while strategic deal volume contracted by one deal in 2025. Easing debt costs following a spate of late-2025 interest rate cuts and limited partner (LP) pressure to deploy dry powder helped propel PE M&A activity across the sector. Regional fragmentation and technical, high-margin services continued to attract new platform formations, with PE firms pursuing acquisitions of scalable targets. PE platform transaction volume increased for the third consecutive year in 2025, rising by four deals YOY to reach a total of 21. In tandem with platform growth, PE add-ons also increased for the third consecutive year, rising 34.5% YOY to 117 transactions in 2025. The multitude of AEC applications in the rapidly expanding Data Center and Energy end markets, combined with the sector’s inherent fragmentation and attractive margin profiles, will likely prompt robust PE M&A activity for the foreseeable future.

PE’s sustained and aggressive pursuit of sector targets created a challenging environment for private strategics, constraining the group’s dealmaking capabilities throughout 2025. Private strategic transaction volume fell 9% YOY to 172 deals. Although macroeconomic volatility throughout 2025 pushed many private buyers to pause or delay deal proceedings, the YOY pullback in private strategic M&A activity was also driven by an increasingly competitive valuation environment. M&A multiples in the AEC Services sector averaged a robust 13.2x EV/EBITDA in 2025, significantly outpacing the sector’s 11.1x EV/EBITDA average seen in 2024. Moreover, median M&A valuations grew 84.9% YOY in 2025, rising to $110 million from the 2024 median of $59.5 million. Years of increased PE penetration across the sector underpinned this growth, with sponsor-backed buyers offering above-market valuations for targets serving booming Data Center and Energy markets or to outbid the growing number of rival PE investors in the space. Consequently, private strategics struggled to keep pace with the rising purchase price environment. Despite losing share to PE buyers in 2025, private strategic M&A continued to represent the lion’s share (47.8%) of sector deal activity. The AEC sector’s large concentration of employee-owned and privately-owned businesses will likely continue fueling private strategic M&A into 2026 as consolidation remains a key growth tactic for sector participants looking to maintain their competitive edge.

Public strategic deal flow flourished in 2025, underpinned by aggressive consolidation activity as sector participants continued to compete for scale, end market coverage, and geographic market share. Public strategic M&A increased 42.9% YOY to 50 transactions. These public buyers targeted accretive businesses with complementary end market service capabilities or those that bolster market share across key regions. Many public participants, including Bowman Consulting Group (Nasdaq:BWMN), pursued inorganic growth favoring mass roll-ups of small-scale, accretive businesses. Bowman completed six transactions in 2025, including its most recent acquisition of energy and infrastructure engineering services provider, RPT Alliance, for an enterprise value of $59.7 million (December 2025). The number of larger-scale, transformative acquisitions pursued by public buyers also picked up as many sponsor-backed businesses approached exit maturity. Although the volume of PE-backed M&A and initial public offering (IPO) exits from Engineering segment businesses fell 38.8% YOY, total exit value surged 147.9% YOY to $37.4 billion in 2025. This exit value growth has reflected public buyers’ increased willingness to acquire mature PE-backed businesses that offer an attractive avenue to bolster scale, geographic coverage, and end market service capabilities. Notably, WSP Global (TSX:WSP) recently announced its acquisition of TRC from PE firm Warburg Pincus for an enterprise value of $3.3 billion, equivalent to 2.2x EV/Revenue and 15.9x EV/EBITDA (December 2025). Since Warburg Pincus’ initial investment (October 2021, undisclosed), TRC has added more than 2,000 new employees through organic initiatives and completed 12 add-on acquisitions, according to press releases related to the transaction.^6,7 WSP cited TRC’s leading position in the Power & Energy market, potential cross-selling opportunities, and significant revenue synergies as key motivation for the acquisition. After closing, WSP will become the largest engineering and design firm in the U.S. on a revenue basis, of which 34% of revenues are expected to stem from the Power & Energy market. AEC Services sector M&A momentum will likely persist in 2026, buoyed by the sector’s affinity for inorganic growth through consolidation, rising PE interest, and strong long-term sector tailwinds.

Meteoric Rise of PE Buyers Transforms AEC Services Sector M&A Landscape

PE’s increased appetite for architecture and engineering businesses has caused a shift in the AEC Services sector M&A landscape over the past several years. Since 2018, PE M&A volume expanded 181.6%, from 49 deals in 2018 to 138 in 2025. This represents an increase in the share of M&A led by PE buyers, rising from 22.3% in 2018 to more than a third (38.3%) of AEC sector M&A in 2025. The proliferation of PE M&A has intensified aggressive consolidation tactics for quality AEC sector businesses among buyers. Capstone expects PE M&A appetite to persist in 2026, a trend that will likely remain a positive valuation tailwind to sellers. Key PE AEC Services sector M&A transactions are detailed below.

• Platform Holdings Capital-Backed PRIME AE Group Acquires Faller, Davis & Associates (December 2025, Undisclosed) – Platform Holdings Capital-backed PRIME AE acquired Florida-based civil engineering firm Faller, Davis & Associates (FDA) for an undisclosed sum in December 2025. The acquisition bolsters PRIME AE’s presence in the high-growth Southeast U.S. market and expands its transportation and environmental service capabilities. In alignment with its inorganic growth strategy, FDA was PRIME AE’s third acquisition in the Florida market in the past three years and the company’s seventh acquisition in the past five years, according to a press release.⁸

“This acquisition and partnership with FDA is an important milestone for PRIME AE, expanding our Southeast market share and enabling us to offer the full scope of AEC services to our customers. PRIME AE has a history of successful integration and expansion through acquisition and Platform Holdings is thrilled to continue to work with PRIME AE and FDA on its next phase of growth and value creation,” noted Charles Goldman, Managing Partner of Platform Holdings Capital and Chairman of PRIME AE, in the press release.

• New Mountain Capital-Backed Qualus Acquires T&D Engineering (August 2025, $110 Million, 2.9x EV/Revenue, 14.9x EV/EBITDA) – New Mountain Capital-backed Qualus, a provider of engineering and field services, acquired John Wood Group’s (LSE:WG.) North American Transmission and Distribution (T&D) Engineering business unit for an enterprise value of $110 million, equivalent to 2.9x EV/Revenue and 14.9x EV/EBITDA (August 2025). T&D Engineering provides power infrastructure engineering services for substations, transmission, distribution, and renewable generation across the U.S. and Canada. Qualus pursued the acquisition to bolster its presence in the Canadian market and acquire highly complementary resources needed to meet growing demand for power generation services.

“This acquisition is consistent with our strategy to expand our geographic footprint and resources in Canada, enabling us to offer our comprehensive end-to-end solutions to an expanded client base,” noted Greg Herasymuik, Qualus President and CEO, in a press release.⁹

• Kelso & Company and ARA Services Partners Acquire Galloway & Company (May 2025, Undisclosed) – In May 2025, PE firms Kelso & Company and ARA Services Partners together acquired integrated, multi-disciplinary architecture and engineering firm Galloway & Company for an undisclosed sum. Galloway provides AEC services for the built environment serving customers in the Commercial, Residential, Industrial, Federal, and Municipal end markets. Kelso and ARA Services cited Galloway’s success in expanding its geographic footprint and service offerings as well as its consistent 18% average annual growth rate over the past 11 years as key motivation for the acquisition, according to a press release.¹⁰ Both firms plan to leverage their deep industry expertise, including ARA Services’ singular focus on investing in AEC sector businesses, to further accelerate Galloway’s already strong growth momentum. This includes operational and strategic support as well as access to capital that will be used to fund Galloway’s strategic inorganic growth investments.

“We look forward to helping scale the company further by supporting its expansion into new markets and service areas, while preserving the culture that makes Galloway unique. Galloway’s leadership team has built a dynamic and values-driven organization with a strong platform for growth,” noted Kelso & Company Partner Sandy Osborne in the press release.

AEC Services sector M&A is well positioned to continue growing into 2026 as PE acquisition appetite for architecture and engineering businesses accelerates. Long-term sector tailwinds are expected to underpin this momentum despite a broader slowdown in construction spending as macroeconomic uncertainty and tariff-based input cost inflation have hindered project planning capabilities. Sector targets serving the Data Center and Power markets, as well as those providing energy efficiency services, will likely remain key acquisition targets as AI demand continues to surge and strain U.S. power generation capacity and costs.

To discuss the impacts of rising PE M&A activity, provide an update on your business, or learn about Capstone’s wide range of advisory services and AEC Services sector knowledge, please contact us.

Izzy Jack, Associate, was the lead Market Intelligence contributor to this article.

Endnotes

1. American Council of Engineering Companies, “Engineering Business Sentiment Q4 2025,” https://www.acec.org/resource/engineering-business-sentiment-q4-2025/, accessed February 2, 2026.

2. American Institute of Architects, “ABI December 2025: Architecture Firm Billings Remain Soft to End the Year,” https://www.aia.org/resource-center/abi-december-2025-architecture-firm-billings-remain-soft-end-year, accessed February 2, 2026.

3. U.S. Census Bureau, “Monthly Construction Spending, October 2025,” https://www.census.gov/construction/c30/current/index.html, accessed February 2, 2026

4. ConstructConnect, “January 2026 Data Center Report: Spending Surges Fivefold in Two Years,” https://news.constructconnect.com/january-2026-data-center-report-spending-surges-fivefold-in-two-years, accessed February 5, 2026.

5. S&P Global, “Data Center Grid-Power Demand to Rise 22% in 2025, Nearly Triple by 2030,” https://www.spglobal.com/energy/en/news-research/latest-news/electric-power/101425-data-center-grid-power-demand-to-rise-22-in-2025-nearly-triple-by-2030, accessed February 2, 2026.

6. Warburg Pincus, “TRC Announces Growth Investment from Warburg Pincus,” https://warburgpincus.com/2021/10/14/trc-announces-growth-investment-from-warburg-pincus/, accessed February 2, 2026.

7. WSP, “WSP to Acquire TRC, Supercharging its Leading Position in the Power & Energy Sector,” https://www.wsp.com/en-gl/investors/press-releases/details/wsp-to-acquire-trc,-supercharging-its-leading-position-in-the-power–energy-sector/3205869/2025, accessed February 2, 2026.

8. PR Newswire, “PRIME AE Expands Transportation and Environmental Capabilities through Acquisition of Faller, Davis & Associates, Inc.,” https://www.prnewswire.com/news-releases/prime-ae-expands-transportation-and-environmental-capabilities-through-acquisition-of-faller-davis–associates-inc-302642406.html, accessed February 2, 2026.

9. Business Wire, “Qualus to Acquire Wood’s North American Transmission and Distribution Engineering Business,” https://www.businesswire.com/news/home/20250829222999/en/Qualus-to-Acquire-Woods-North-American-Transmission-and-Distribution-Engineering-Business, accessed February 2, 2026.

10. PR Newswire, “Galloway & Company, LLC, Launches New Growth Opportunities with ARA Services Partners and Kelso & Company,” https://www.prnewswire.com/news-releases/galloway–company-llc-launches-new-growth-opportunities-with-ara-services-partners-and-kelso–company-302454732.html, accessed March 2, 2026.