Hatch merger with LTK
In 2018, Hatch, a Canadian-based $1.5 billion revenue global AEC firm engaged AEC Advisors to help expand into the U.S. transportation market. Hatch was seeking to invest in a technically excellent U.S. firm with strong leadership, and to bring Hatch’s resources and global capabilities to achieve growth in this market.
As a global AEC firm, Hatch was seeking a business with significant size and scale in order to establish a strong foundation in the U.S. Cultural fit was paramount. However, not only had Hatch never completed an acquisition of such scale in the U.S., but Hatch is also an employee-owned company, with a highly successful but conservative internal ownership transition model, which could make structuring such a transaction more difficult. Overall, the primary challenge was to identify, structure, and execute a transaction with a sizable, culturally-compatible U.S. transportation firm, which are some of the most highly sought-after firms in the AEC industry.
AEC Advisors identified and approached LTK Engineering Services. At ~$120 million in revenue, they were one of the largest rail and transit-focused AEC firm in the U.S. at the time. LTK was also a Key Client of AEC Advisors and we had a strong relationship with management and the Board as a result of several consulting projects.
Furthermore, LTK also had an ESOP that owned a minority position in the company, with the balance owned directly by key leaders. The ESOP ownership was important to Hatch because it meant that LTK’s employees were accustomed to employee-ownership and potentially more likely to be interested in being owners in an acquisition or merger.
LTK had a strategy for growth into larger projects and broader services and was actively considering how to achieve this.
Hatch’s employee-ownership centric culture and emphasis on innovation resonated well with LTK, as these were also central tenets of LTK’s culture. Once the cultural fit was clear, a combined strategy emerged and an acceptable valuation and structure for a deal quickly followed. LTK provided Hatch with one of the most experienced and recognized rail and transit businesses in the U.S., while Hatch provided a global platform and resources to grow LTK’s operations. The merger was completed in November 2020.