LTK merges with Hatch

Backstory

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. 

Challenge

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.  

Turning Point

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.  

Outcome

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.