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GROWTH – Acquisition Raises Profile Of AECOM

Though L.A.’s publicly traded Fortune 500 giants continue to be swept up by outsiders, one of the area’s largest private companies is about to get about 50 percent bigger.

L.A.-based AECOM Technology Corp. one of the country’s biggest design and construction firms and parent of Daniel, Mann, Johnson & Mendenhall has agreed to buy one of Europe’s largest engineering and construction companies.

Once the deal is finalized in April, subject to shareholder approval, AECOM will be merged with London-based Maunsell. The combined company’s headquarters will remain in Los Angeles. Together, the companies currently employ 11,000 people worldwide and have annual revenues of about $1.5 billion

AECOM which designs and constructs office buildings, airports, highways, mass-transit systems, ports, prisons, schools and wastewater plants has been wanting to branch out to Asia, the Middle East, Europe and Australia, where Maunsell has offices. In turn, Maunsell has been eyeing the U.S. market.

“We are a dominant player in the U.S. today. What this does is give us a position from which to become a dominant global player,” said AECOM President Ray Holdsworth. “This will make us the largest private-sector architectural/engineering company in the world.”

The two engineering companies have been discussing a merger since last May. Under terms of the deal, AECOM, a private employee-owned company, will acquire Maunsell’s ownership shares in exchange for AECOM shares and cash, company officials said. The exact value of the deal was not disclosed, but industry observers confirmed that it is one of the largest transactions in the engineering/construction industry in recent years.

(Both companies are private, employee-owned firms, which are not required to publicly disclose financial information.)

In fiscal 1999, AECOM’s revenues totaled $990 million, landing it at No. 14 on the Business Journal’s annual list of L.A. County’s largest private companies. After the Maunsell deal, AECOM would jump to No. 6 on the list.

The Los Angeles company is following a trend in which big engineering companies are joining forces with other firms that complement their skills.

“This is a case where a domestic company and an international company will be more positively able to align themselves together and compete on a worldwide basis,” said Scott Beiser, senior managing director for the investment banking firm of Houlihan, Lokey, Howard & Zukin and longtime adviser to AECOM.

This is just one of several mergers that have occurred in the California engineering industry. Jacobs Engineering Group Inc. of Pasadena acquired the engineering unit of Stork of the Netherlands last year to expand into northern Europe. In 1998, Jacobs acquired the engineering firm Sverdrup for $200 million in cash.

Also, URS Corp. in San Francisco last year acquired Dames & Moore, a large engineering and construction firm in Los Angeles.

AECOM’s president noted that he is seeing more companies that want to expand globally and are looking to international engineering and construction companies to design and build the infrastructure and facilities they need.

“In particular, they are looking to Asia as a productive base,” Holdsworth said. “I don’t think there is a private firm that has the planning and design capability that will be close to our depth of skill.”

AECOM operates through several subsidiaries across the United States. They are: Daniel, Mann, Johnson & Mendenhall, Los Angeles’ largest architectural firm; Frederic R. Harris in New York; Holmes & Narver, a designer in Orange; Turner, Collie & Braden, an architectural firm in Houston; McClier Corp., a design builder in Chicago; and Consoer Townsend Envirodyne, an environmental consultant in Chicago.

AECOM is working on several high-profile projects. In Southern California, it is building the new 300,000-square-foot Rand Corp. headquarters in Santa Monica, rebuilding the Cal State Northridge campus damaged during the earthquake, doing construction on the Alameda Corridor, and renovating the Marriott Hotel in Marina del Rey.

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