Sweco’s Latest Acquisition Raises Many Questions

/ October 26, 2020/ Infrastructures, M&As (small under $50m in revenues), Norway, Sweco

Sweco Acquires in the Norwegian Architectural Market

Sweco’s latest acquisition raises many questions. The company acquired a Norwegian architect firm, TAG Arkitekter (TAG). TAG is a decently-sized firm in a fragmented industry. It had 2019 revenues of NOK 113m (~USD 12m). The company has 95 employees across Oslo, Bergen, and Trondheim.

Sweco has been following a long-lasting strategy in the architecture market. It started its operations in this space in 1958, intending to bring together architectural and engineering services. The company now has 1,300 architects and landscape architects globally.

Architecture Is the Consulting of Infrastructure Engineering

In many aspects, architecture is similar to consulting in ER&D and IT services. With architecture, Sweco gets involved earlier in the project decision lifecycle. It also gains a project management role. The comparison with consulting is also relevant in terms of numbers: Sweco has 7% of its headcount active in architecture. Business consulting also represents 5 to 10% of IT services spending.

The TAG Acquisition Is Countercyclical

The acquisition of TAG, therefore, makes a lot of sense, does not? Well, not quite. TAG operates in the residential and building real estate architecture sector, which has significantly suffered from the COVID-19 pandemic. The future looks uncertain for TAG, with a second wave now certain. The uncertainly will last until at least the summer of 2021, once mass vaccination occurs. Sweco is, therefore, making a counter-cyclical acquisition. The TAG acquisition, therefore, raises many questions. The transaction is a bold one, we think, given the current market conditions.

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