New Study Shows ESOP A&E Firms Have Higher Valuations Than Non-ESOP A&E Firms

A new survey ("A/E Business Valuation and M&A Transaction Survey") of 205 closely held architecture and engineering firms by the consulting firm Rusk O'Brien Gido and Partners found that ESOP companies had valuations that were higher than non-ESOP companies. For instance, looking at enterprise value relative to net service revenue, ESOPs had a median value of 47.8% of net service revenue compared to 43.8% for all firms. ESOPs represented 20% of the sample overall, so the comparison just to non-ESOP companies would be somewhat higher. The total range of this measure was from 36% for the lowest quartile to 54% for the highest, so the difference between ESOP and non-ESOP firms is significant.

Looking at enterprise value relative to EBITDA before bonuses are paid to partners, the study found a median of 4.18 and a trimmed mean (ignoring the top and bottom 10% of the sample) of 4.88 for the entire sample. For ESOP companies the numbers were 5.9 and 7.52.