During last week’s BVR webinar Valuing Architecture & Engineering Firms Ian Rusk and Michael O’Brien (Rusk O’Brien Gido) discussed the valuation challenges, operations peculiarities, and emerging trends unique to this volatile industry. One such issue is backlog. “Two years ago, while backlog was important, it did not take a front seat, if you will, in the valuation process,” reports O’Brien. Now it's a different story. This is especially true with firms that are acquiring other practices. “They spend more time trying to understand the backlog, how firm that backlog is, who is it with, can they pay, and so on and so forth,” he adds.
Backlog has been “a very important shift in the norms in valuation in the A/E industry here just in the last year,” Rusk concurred. Rusk and O’Brien saw healthy A/E firms’ backlogs disappear as projects were put on hold or canceled. The issue has changed industry dynamics, so “as appraisers, you have to be even more skeptical when you're looking at future earnings, projections and backlog,” he adds. “It's going to be incumbent upon the appraiser to assess the risk,” O'Brien agreed.
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