EBITDA Multiples for Engineering Companies – 2023 Report

The following report provides valuation multiples for private engineering companies as of Q3 2023. Our research team sourced the data through industry databases, private equity networks, and interviews with M&A professionals. (Sources)

The results of our research can be seen in the tables below, broken down by EBITDA/revenue range and company type.

EBITDA Multiples for Private Engineering Companies, Q3 2023

Company Type EBITDA Range
$1M-$3M $3M-5M $5M-10M
Chemical Consultants 6.6x 7.8x 9.1x
Civil & Structural Engineers 6.3x 7.4x 8.6x
Electrical Engineering 5.8x 6.9x 7.7x
Environmental  4.2x 5.4x 6.9x
Industrial Automation 5x 6.2x 7.5x
Mechanical Engineering  5.5x 6.8x 7.6x
Residential Construction 4.9x 6x 7.1x

Revenue Multiples for Private Engineering Companies, Q3 2023

Company Type Revenue Range
$1M-5M $5M-10M $10M-50M
Chemical Consultants 2.4x 2.4x 2.6x
Civil & Structural Engineers 1.9x 2.1x 2.3x
Electrical Engineering 1.8x 1.8x 2.1x
Environmental  1.4x 1.6x 2x
Industrial Automation 1.8x 2x 2.4x
Mechanical Engineering  2.2x 2.5x 2.8x
Residential Construction 2x 2.3x 2.6x

The section below details the current state of M&A for engineering companies, as well as predictions made by our research team about what to expect when selling an engineering firm in the coming year.

The State of Engineering Companies M&A

The engineering firm M&A market saw an initial upset moving into the 2020s with widespread cancellation of projects as a result of the pandemic. Since H1 2021, however, multiples have seen a steady increase, and have remained resilient through the economic downturn that began in H2 2022. Some sectors fared better than others; for example, specialty engineering companies (chemical engineering, civil engineering) performed significantly better than a vertical like residential, which saw more extreme ups and downs as construction slowed following the pandemic.

The relationship between these verticals is represented in the chart below, which charts the trajectory of EBITDA multiples for engineering companies between H1 2020 and their current state.

Our research team identified two major concerns for business owners selling in 2023; the first is a talent shortage which has come into full swing over the last few years as the older generation of engineers begins to retire, leading to a ~30% attrition rate across several engineering subsectors. The second is owner dependency, as those who do not retire find themselves taking on a larger portion of their company’s work to compensate for a smaller staff.

Our team has the following predictions for Engineering Company M&A in 2024: 

  • Strategic employee retention will result in higher multiples. A company’s long-term workforce retention directly correlates with its overall value. Businesses adept at navigating labor shortages will be perceived as more valuable by potential acquirers, primarily due to their enhanced financial stability compared to counterparts grappling with frequent turnover.
  • Large acquirers will begin to roll-up smaller companies. While larger deals have seen some level of slow-down over the last several years, M&A involving smaller engineering firms is likely to increase as large acquirers begin scooping up smaller companies, presenting a year of opportunity for firms in both platform and add-on deals. 
  • Interest rates will drive down valuations, but not for much longer. Our team predicts that interest rates will begin declining next year. Until that time, engineering firms can expect to struggle against lower valuations brought on by the current interest rates. This timeline may be a blessing in disguise, however, as it gives engineering company owners time to build a relationship with an M&A advisor in order to strike when the market shifts.

Selling Your Engineering Company

Selling an engineering company is a stressful process that takes an emotional and psychological toll on business owners, even if they have experience in the M&A process. I know that stress personally, having sold several businesses over the last few decades. 

Speaking with more experienced business owners helped me gain an understanding of what to expect. If you find yourself in need of such counsel, I’m available to speak for a few minutes. Contact me via the link below or through the contact page on this website.

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