AEC Services Market Update

AEC Services Market Remains Resilient Despite Macroeconomic Volatility

Capstone Partners inaugural Architecture, Engineering & Construction Services Market Update reports that resilience amid macroeconomic volatility and inflationary headwinds has continued to underscore recent merger and acquisition (M&A) activity across the sector. Volatility and headwinds aside, Capstone anticipates that Architecture, Engineering & Construction (AEC) Services market growth and M&A activity will continue accelerating, particularly as additional interest rate cuts materialize and residential and commercial construction rebounds.

AEC Services firms have lowered next twelve-month (NTM) backlog projections as tariff policy updates—piling on to ongoing inflationary cost pressures—have pushed input costs higher and subdued new construction starts. Moreover, AEC Services firms’ backlog projections have been further weighed down by proposed federal legislation that has jeopardized federal funds and incentives that have underscored energy transition construction momentum to date. However, the ongoing roll-out of government funded infrastructure projects and surging data center demand have kept project backlogs stable through year to date (YTD) as construction spending has continued to expand. Looking ahead, AEC market growth will likely accelerate long-term as interest rate cuts reinvigorate residential and commercial construction activity.

AEC Services market M&A volume has kept pace year-over-year (YOY) after accelerating significantly in 2024, with YTD 2025 activity totaling 131 transactions announced or closed compared to 137 in the prior year period. Stable M&A activity has followed two consecutive years of sector volume growth, rising 24.2% YOY in 2024. Tariff uncertainty YTD has pushed private strategics to delay deals—with activity down 10 transactions YOY—but the pullback will likely be short-lived as trade policy settles. After three years of M&A declines, public buyers have picked up inorganic growth efforts YTD, with deal volume up 25% YOY.

To date, AEC market private equity deal activity has paced the prior year period after growing 37.3% YOY in 2024. While on par YOY in YTD 2025, the influx of new platform formations—up 33.3% YOY in 2024—has facilitated more than two years of growth in sponsor-backed M&A. To date, add-on M&A has risen by three deals YOY. Private equity interest in the sector has continued to rise as firms look to invest in businesses with technical, high-margin services with fragmented operations serving a wide variety of end-markets. Capstone anticipates financial buyer M&A to further accelerate across the AEC Services market as additional interest rate cuts materialize and project financing costs ease.

Also included in this report:

• A breakdown of AEC equity financing deal volume, total capital invested, and median pre-money valuations between 2019 and YTD 2025.
• An in-depth analysis of private equity activity across the AEC market, with a look into recent transactions from financial buyers.
• A comprehensive review of the NTM backlog projections of both architecture and engineering firms.

Capstone Partners’ Building Products and Construction Services Team provides M&A, capital formation, and financial advisory services to the owners of middle market businesses in the industry. Our team partners with leading mid-to-large sized businesses that serve growing end-markets.

For more information on the Building Products and Construction Services Industry Market trends featured in this report or to speak with one of our M&A Team members about how to grow, value, and/or sell your company, we are here to help. Contact us today.