A Partnership to Strengthen The Ability to Grow
Geosyntec Consultants, at $500 million in revenue, is one of the world’s leading and top performing environmental consulting firms. Based on our KPI data, the firm is a top quartile performer, generating a 10% compounded annual organic growth rate, with essentially not a single down year in the company’s history, and top quartile profit margins. Furthermore, the firm was 100% owned by 600+ shareholders out of 1,600+ employees. The employee ownership culture has been a major differentiator to recruit and retain the best talent.
Geosyntec has been a Key Client of AEC Advisors since 2018. We have advised on buyside acquisitions, performance benchmarking, and assisted with internal ownership transition planning and modeling.
For internal ownership transition purposes, Geosyntec valued the company’s stock at a conservative ~2x book value. While this allowed for a smooth internal ownership transition, it also significantly undervalued the company relative to market value. Furthermore, the low internal value made sizable acquisitions financially inefficient, which impeded their aspiration to accelerate their already strong organic growth through a robust M&A strategy.
Geosyntec was at a crossroads. They wanted to (a) maintain a differentiated employee ownership culture; (b) accelerate growth through select strategic acquisitions; and (c) increase investment in their digital and other market strategies, while simultaneously transitioning internal stock closer to market value. However, they also did not want to lose their brand and operational autonomy, which made the option of merging with a strategic buyer less appealing.
AEC Advisors initially worked with management to examine its strategic alternatives for achieving these imperatives. This process resulted in Geosyntec engaging AEC Advisors to be their exclusive financial advisor, and within several months, a private equity investment emerged as the best alternative.
During the following four months, AEC Advisors systematically explored the private equity market with Geosyntec, narrowing down the best fits to several high caliber candidates.
Ultimately, Blackstone Energy Partners emerged as the best fit for two key reasons, among others:
- Geosyntec’s ability to maintain their high-performance culture of employee ownership, collaboration, and technical leadership. Geosyntec employees continue to own a substantial 40% – 45% stake in the business and have an additional option pool to recruit and retain top talent, a key to Geosyntec’s success. Furthermore, Blackstone and Geosyntec developed a creative mechanism to allow for internal share transactions amongst employees, further maintaining the long-term viability of the employee-owned stake in the business.
- Ability to tap into Blackstone’s existing portfolio companies as potential clients. As one of the leading energy investors in the world, Blackstone’s portfolio companies consist of some of the leading firms paving the way in the transition from fossil fuels to renewable energy sources. This presented an immediate revenue synergy and business opportunity for Geosyntec to provide environmental engineering and consulting services to Blackstone’s portfolio companies and major projects.
Our partnership with Blackstone Energy Partners will strengthen our ability to grow through strategic acquisitions and recruiting of top talent while enhancing our position as a preferred employer for innovative engineers and scientists. We foresee substantial benefits to our employees and clients as we expand our capabilities and service offerings, and as we support our clients in larger and more complex projects
To date, the transaction with Blackstone is the largest private equity investment into a previously employee-owned firm in the AEC industry. The investment achieved Geosyntec’s key objectives: (1) liquidity for shareholders at market value, while maintaining the employee ownership culture; (2) a significant stock option program to help attract and retain young talent; (3) access to lower cost capital to accelerate growth via strategic acquisitions and investment in digitalization and other market initiatives; and (4) retention of the firm’s leading market platform and brand, and culture of collaboration and technical leadership.