Infrastructure Investment and Jobs Act: Charting the Impact on the Engineering Services Industry
In the recently released BGL Engineering Services Insider: Powerful Industry Tailwinds and Influx of Investor Interest Fuels Deal Activity report, the firm’s Industrial & Infrastructure Services investment banking team revealed demand for Engineering Services firms is expected to remain robust, supported by long-term megatrends including the Infrastructure Investment and Jobs Act (IIJA) bill rollout.
Historical underinvestment in the nation’s aging infrastructure will drive a multi-decade replacement and upgrade cycle, which the IIJA spending will only begin to address.
Signed into law by President Joe Biden in November 2021, the IIJA is a $1.2 trillion investment aimed at repairing, upgrading, and modernizing the nation’s infrastructure assets. According to the American Society of Civil Engineers (ASCE), the bipartisan IIJA marks the country’s largest investment in infrastructure across all Report Card categories in nearly a century.
As of July 2023, only $124 billion had been allocated from the fund, indicating a substantial multi-year tailwind supporting robust growth for the industry.
Industry participants consider this period as the beginning of the spending cycle.
“The IIJA only passed in late 2021, and really all through 2022, the refrain that we were hearing throughout the industry was that none of that money had really started to flow through until probably sometime early this year ,” said Tom Secker, SVP Corporate Development at Trilon Group. “So, I think that most of that money, especially for the front-end planning, design, and consultative work, will likely take about five years to be spent, and that’s really just from one bill.”
Tim Schmitt, Chief Development Officer at Parsons Corporation, echoed this sentiment, “I also don’t think there’s going to be this cliff in 2026 or 2027, where suddenly we have negative market growth and headwinds from a transportation engineering overall macro perspective. I think it’s just going to continue to slowly get pushed to the right, and there will be favorable market fundamentals for the next 7 to 8 years and beyond that.”
While changes in government control or a severe economic recession could potentially alter this trajectory, industry insiders believe such significant changes are unlikely. Jim Thompson, CEO of DCCM, emphasized the bipartisan agreement on the inherent value of infrastructure spending.
“Nobody denies the need for increased capacities on our highway systems, for example,” Thompson said.The push for electric vehicles and modifying our transportation infrastructure to accommodate the transition is going to be significant.”
Overall, feedback from industry participants has been overwhelmingly positive.
“Everyone has more work than they have capacity to complete that work. We easily have the highest backlogs across the entire Trilon family of companies that we’ve ever had,” said Secker.
How will the IIJA and other trends impact the Industrial & Infrastructure Services M&A landscape moving forward? Download the full Insider to read the complete report and gain greater insights into this topic and the Infrastructure and Engineering Services trends shaping the market.
Led by Eliott S. Musick, BGL’s Industrial & Infrastructure Services team has consistently delivered value to the middle market. Please reach out via our contact form to learn more about the investment banking services we provide to the Engineering Services industry.