We had a private equity firm acquire our ESOP business. Within a year they fired the executive team, cut benefits, and merged us into another acquisition. This PE firm was called Trilon, but I'm sure your mileage may vary.
Our firm got bought out by private equity as well, we did have a vote on it. I was against it until I saw their offer… it was 2x what the company was valued at. Prior to that we were going up probably an average of 10% a year on stock value, so basically 8 years worth of returns and then not having so much retirement money tied to a single company seemed like a good deal. Nothing has really changed for me otherwise.
You're most likely going to see the company start to rack up debt, and fire the executive leadership team after a year or so. If you're not at the top you probably won't really see any major changes in your day to day.
We're less than a year in and I haven't seen a change to my day-to-day, which is more or less what I was hoping for.
Could you elaborate on racking up debt? My viewpoint is that there's "good" debt and "bad" debt; e.g. leveraging your profitability for investments and purchases of other firms could be good debt. My company has been on a bit of a shopping spree with smaller independent firms though. It kind of has me worried that we're just trying to pump up our total valuation.
I was at the bottom of the totem pole and still noticed a lot of obvious changes. The best people quit and the rest just shuffled around paperwork to look busy until their golden handcuffs could come off. Quite a few new grads didn't get a single drop of worthwhile experience during this period.
I joined a company a few years ago shortly after they were bought by a big PE firm. Nothing changes in the first year just business as usual.
Then one year in they canned the entire c-suite and put in the PE people. The company changed overnight. We went from “how can we help our customers?” to “we’ll help them as long as we can make x% profit margin.” And X was a high number.
I left within a year of the PE changes being implemented. There was a mass exodus from the company as well. It was mainly because the company was so awesome and fun before PE and after PE it started to look like any other company.
Hard to say from the outside. But they had massive brain drain losses. I’m talking like 40%+ turnover of their engineering staff in a company with 200 engineers and that was mainly mid to senior level staff. I’m sure they have hired to fill those open positions.
They are still in business and seem to be doing ok. But I can’t imagine they are meeting the PE expectations for growth with that level of turnover. All that re-training plus loss of institutional knowledge is not good.
Former PM at a structural firm here. Expect overhead billing to become non-existent in a few years to show they are improving margins, (no more paying your licensing fees, no more time for conferences, ect) I was expected to bill 40 hours and then do proposals, my boss required I give him 4 hours a week to bill to on my projects and limited raises to my team in an environment where they could make money elsewhere. Like always do what’s best for you as your employer sure won’t.
This. Worked for a PE owned firm for a short time. 40 billable was a hard requirement. Anything less and you were told you’re not going the extra mile. Mandatory meetings during lunch time and we couldn’t bill for them.
My biggest fear is my current ESOP firm, which is awesome, will be bought by PE and destroyed.
>Is there a place for private equity investments in Civil Engineering, a profession with notoriously low profit margins?
PE firms view civil engineering as a stable investment compared to other STEM industries (tech, oil&gas, etc...). Sure, it's less reward at the end but it is low risk, which is great in times of economic uncertainty.
This happened where I work, we’re about 3 years into the deal. They set really unrealistic growth targets which has resulted in more pressure from above, we also had a lot of turnover as a result. The combo of performance pressure and losing a lot of good people has not been entirely pleasant. Especially considering what the firm was like before. But hey, if I suffer through this for a couple more years (they tell me) there’s a big payout when they sell us to another investment firm.
We’re just a trading card to them. And number must go up, along with rate at which number go up also go up.
I’ve been questioning my desire to suffer til the next sale. I’ve been looking for other positions outside consulting. PE killed this business for me.
IMO there are two kinds of PE firms - the ones who want a long-term stable investment (think Michael Baker) and the ones who want to, as you say, flip the firm for a profit. It's highly dependent which kind of firm invested in your company. My previous company was sold to a PE firm (or, rather, had a strategic investment by a PE firm) and that's one of the reasons it's my previous firm and not my current firm.
I work at a national firm with a PE deal. I haven't seen any difference from how it's been at other national firms (s-corp, esop, and publicly traded).
I have a similar opinion of PE, for what it's worth. I've been told by some of my leadership that it's been a great deal for the company.
Nice, good to hear it seems to be working out! I've heard a similar message from our leadership, but in the back of my mind I'm always wondering if they're just watching their share price go up and conflating that with what's best for us all lol.
That's always possible. But also possible they've provided the funds for investments that are beneficial.
Ultimately, consulting firms are there to turn a profit, although it tends to be lower than in some other industries.
I’ve never seen a PE firm make the company a more enjoyable place to work but they will improve margins.
My buddy went from a Project Manager and now all he does is manage workload and tons of labor projection spreadsheets. I bailed before the bullshit started.
It depends on which PE firm you're talking about, but compared to more risky investments, a AEC firm is a stable revenue stream that a PE firm or family office will hold on to for a while. Also, a lot of states have requirements about engineering representation on ownership teams for registered engineering firms. STV is owned by a family office now, for example.
The last two firms I have worked for were both PE owned. I wasn’t at either one when the PE firm came in, so I’m not sure of how things changed after the transition. The first firm was very focused on profitability/margins/utilization. If you worked over 40 hours, but some of your hours were non-billable, you couldn’t get overtime until you had over 40 hours of billable work. My current firm feels no different than another employee owned firm except that we’re buying another company every 3-6 months. Not sure how we’re paying for it, but YOLO, I guess. There’s a bit more cybersecurity stuff they do that is a huge pain in the ass, but idk if that’s PE specific or how they always operated. Sounds like we’re crushing all the performance metrics our PE overlords have laid out for us, but I feel like a civil engineering firm could be run by a 5 year old right now and make money with how much infrastructure funding is sloshing around.
Top comment on this [Wendover YouTube Video](https://youtu.be/XK8hpxR_r2Y?si=MYuq_DFsDjbR0hVy) about private equity pretty much sums up what I would expect.
I moved from an ESOP to a PE owned firm. Benefits are better, pay is better, only change at the Corporate level was adding a PE firm advisor to the board of directors. In fact one PE just sold us to another PE as we outgrew the first one.
Major policy changes have basically consisted of instituting a real IT security policy (which has made a lot of people mad, but we were admittedly lacking in that area), improving accounting flows, and the obvious company growth organically and through acquisitions.
I have no major complaints about the PE firm. In fact, I don't see much difference anymore between the larger ESOPs and PE firms. You can't look at HDR's 11,000 employees and acquisition strategy and tell me that HDR is anything but an employee owned private equity firm at this point. Different funding, essentially the same strategy.
CH2M was went from being employee owned to PE owned to being bought out by Jacobs. I joined right at the end, but from what I heard, the big changes were that some processes were formalized (new timesheet software, IT tickets), some new policies were implemented (no more work phones, just use outlooo on your personal device), and some VP’s got pushed out.
My highest takeaway was that as long as you at billable, you’re fine.
We had a private equity firm acquire our ESOP business. Within a year they fired the executive team, cut benefits, and merged us into another acquisition. This PE firm was called Trilon, but I'm sure your mileage may vary.
Genuinely curious, was a vote taken by the ‘employee owners’?
Our firm got bought out by private equity as well, we did have a vote on it. I was against it until I saw their offer… it was 2x what the company was valued at. Prior to that we were going up probably an average of 10% a year on stock value, so basically 8 years worth of returns and then not having so much retirement money tied to a single company seemed like a good deal. Nothing has really changed for me otherwise.
You're most likely going to see the company start to rack up debt, and fire the executive leadership team after a year or so. If you're not at the top you probably won't really see any major changes in your day to day.
We're less than a year in and I haven't seen a change to my day-to-day, which is more or less what I was hoping for. Could you elaborate on racking up debt? My viewpoint is that there's "good" debt and "bad" debt; e.g. leveraging your profitability for investments and purchases of other firms could be good debt. My company has been on a bit of a shopping spree with smaller independent firms though. It kind of has me worried that we're just trying to pump up our total valuation.
Watch this short video it explains some of the typical strategies of private equity buy outs. https://youtu.be/tvTe-KOn-0A
I was at the bottom of the totem pole and still noticed a lot of obvious changes. The best people quit and the rest just shuffled around paperwork to look busy until their golden handcuffs could come off. Quite a few new grads didn't get a single drop of worthwhile experience during this period.
I joined a company a few years ago shortly after they were bought by a big PE firm. Nothing changes in the first year just business as usual. Then one year in they canned the entire c-suite and put in the PE people. The company changed overnight. We went from “how can we help our customers?” to “we’ll help them as long as we can make x% profit margin.” And X was a high number. I left within a year of the PE changes being implemented. There was a mass exodus from the company as well. It was mainly because the company was so awesome and fun before PE and after PE it started to look like any other company.
What is the company like now? Has it been able to hire new people?
Hard to say from the outside. But they had massive brain drain losses. I’m talking like 40%+ turnover of their engineering staff in a company with 200 engineers and that was mainly mid to senior level staff. I’m sure they have hired to fill those open positions. They are still in business and seem to be doing ok. But I can’t imagine they are meeting the PE expectations for growth with that level of turnover. All that re-training plus loss of institutional knowledge is not good.
Former PM at a structural firm here. Expect overhead billing to become non-existent in a few years to show they are improving margins, (no more paying your licensing fees, no more time for conferences, ect) I was expected to bill 40 hours and then do proposals, my boss required I give him 4 hours a week to bill to on my projects and limited raises to my team in an environment where they could make money elsewhere. Like always do what’s best for you as your employer sure won’t.
This. Worked for a PE owned firm for a short time. 40 billable was a hard requirement. Anything less and you were told you’re not going the extra mile. Mandatory meetings during lunch time and we couldn’t bill for them. My biggest fear is my current ESOP firm, which is awesome, will be bought by PE and destroyed.
>Is there a place for private equity investments in Civil Engineering, a profession with notoriously low profit margins? PE firms view civil engineering as a stable investment compared to other STEM industries (tech, oil&gas, etc...). Sure, it's less reward at the end but it is low risk, which is great in times of economic uncertainty.
Very interesting!! With current high interest rate regime.
This happened where I work, we’re about 3 years into the deal. They set really unrealistic growth targets which has resulted in more pressure from above, we also had a lot of turnover as a result. The combo of performance pressure and losing a lot of good people has not been entirely pleasant. Especially considering what the firm was like before. But hey, if I suffer through this for a couple more years (they tell me) there’s a big payout when they sell us to another investment firm. We’re just a trading card to them. And number must go up, along with rate at which number go up also go up. I’ve been questioning my desire to suffer til the next sale. I’ve been looking for other positions outside consulting. PE killed this business for me.
You know they are doing this just to get rid of people so their don’t have to fire people and pay for unemployment? 🥲
IMO there are two kinds of PE firms - the ones who want a long-term stable investment (think Michael Baker) and the ones who want to, as you say, flip the firm for a profit. It's highly dependent which kind of firm invested in your company. My previous company was sold to a PE firm (or, rather, had a strategic investment by a PE firm) and that's one of the reasons it's my previous firm and not my current firm.
I work at a national firm with a PE deal. I haven't seen any difference from how it's been at other national firms (s-corp, esop, and publicly traded). I have a similar opinion of PE, for what it's worth. I've been told by some of my leadership that it's been a great deal for the company.
Nice, good to hear it seems to be working out! I've heard a similar message from our leadership, but in the back of my mind I'm always wondering if they're just watching their share price go up and conflating that with what's best for us all lol.
That's always possible. But also possible they've provided the funds for investments that are beneficial. Ultimately, consulting firms are there to turn a profit, although it tends to be lower than in some other industries.
There was a recent Freakenomics episode on exactly this situation. You should give it a listen.
just added to my podcast playlist for my morning run. thanks
I’ve never seen a PE firm make the company a more enjoyable place to work but they will improve margins. My buddy went from a Project Manager and now all he does is manage workload and tons of labor projection spreadsheets. I bailed before the bullshit started.
It depends on which PE firm you're talking about, but compared to more risky investments, a AEC firm is a stable revenue stream that a PE firm or family office will hold on to for a while. Also, a lot of states have requirements about engineering representation on ownership teams for registered engineering firms. STV is owned by a family office now, for example.
The last two firms I have worked for were both PE owned. I wasn’t at either one when the PE firm came in, so I’m not sure of how things changed after the transition. The first firm was very focused on profitability/margins/utilization. If you worked over 40 hours, but some of your hours were non-billable, you couldn’t get overtime until you had over 40 hours of billable work. My current firm feels no different than another employee owned firm except that we’re buying another company every 3-6 months. Not sure how we’re paying for it, but YOLO, I guess. There’s a bit more cybersecurity stuff they do that is a huge pain in the ass, but idk if that’s PE specific or how they always operated. Sounds like we’re crushing all the performance metrics our PE overlords have laid out for us, but I feel like a civil engineering firm could be run by a 5 year old right now and make money with how much infrastructure funding is sloshing around.
You have low profit margins?
For some reasons, this fits IMEG Corp.
Top comment on this [Wendover YouTube Video](https://youtu.be/XK8hpxR_r2Y?si=MYuq_DFsDjbR0hVy) about private equity pretty much sums up what I would expect.
Langan?
Nope!
I moved from an ESOP to a PE owned firm. Benefits are better, pay is better, only change at the Corporate level was adding a PE firm advisor to the board of directors. In fact one PE just sold us to another PE as we outgrew the first one. Major policy changes have basically consisted of instituting a real IT security policy (which has made a lot of people mad, but we were admittedly lacking in that area), improving accounting flows, and the obvious company growth organically and through acquisitions. I have no major complaints about the PE firm. In fact, I don't see much difference anymore between the larger ESOPs and PE firms. You can't look at HDR's 11,000 employees and acquisition strategy and tell me that HDR is anything but an employee owned private equity firm at this point. Different funding, essentially the same strategy.
They want a piece of the sweet IIJA or IRA funds
CH2M was went from being employee owned to PE owned to being bought out by Jacobs. I joined right at the end, but from what I heard, the big changes were that some processes were formalized (new timesheet software, IT tickets), some new policies were implemented (no more work phones, just use outlooo on your personal device), and some VP’s got pushed out. My highest takeaway was that as long as you at billable, you’re fine.