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Tuesday, May 28, 2024

Salas O’Brien Nearly Triples Revenue to $487M

Salas O’Brien’s M&A hustle has paid off.

The Irvine-based engineering firm this year took the top spot for Orange County’s fastest-growing large private company, following two years of increased merger activity.

Revenue for Salas nearly tripled to $487 million over the past two years, up from $174 million in 2020.

Last year saw eight acquisitions in total, continuing a push from 2021, which had six mergers, and 2020, which had five.

Its streak has helped the company reach 60% total revenue growth including 19% organically, according CEO Darin Anderson. The company is currently on track to increase up to 15% organic growth this year with total growth of around 60%.

Salas has already completed six acquisitions since the start of 2023—its latest being consulting engineering firm EME Group, which brought the company’s total footprint to 70 North American offices with 2,450 team members. The firm expects to do one to two more mergers before the end of the year.

“We find like-minded organizations that can be better off joining us and getting access to most exciting projects,” Anderson told the Business Journal.

“As an engineer, you want to do the most complex projects and have the biggest impact to your client and communities.”

The company finances its deals through shares and cash, which comes from debt to the OC-based teams of JP Morgan, Bank of America, Wells Fargo, Capital One and Fifth Third Bank.

Local Growth

Salas’ designation as OC’s fastest-growing large private company comes months after it saw the largest local billing increase among OC-based engineering firms, according to Business Journal data.

The company reported that local billings jumped 82% to $20.4 million, rising four slots from the year prior to No. 17 on the Business Journal’s Engineering Firms list on Aug. 28.

That local growth, and Salas’ overall revenue increase, have both been driven by the company’s expanding markets and M&A streak.

“We work in market sectors that are very healthy and vibrant,” such as telecom, healthcare, higher education, pharmaceutical, food and beverage, industrial manufacturing, and defense, Anderson said.

“Those markets are growing robustly and are expected to grow over the next 20 years.”

Upcoming Projects

Companies that merge with Salas will work on projects ranging from facilities for NASA to net zero carbon amenities for universities, hospitals, industrial facilities and defense agencies.

Salas is currently working on the second and third all-electric hospitals in the world, which will both be in Northern California.

The first of which is local—the University of California, Irvine Medical Center along Jamboree Road in Irvine— which is expected to open in 2025.

UCI Medical Center will be powered by solar panels, while Salas plans to fuel cells and other clean energy systems for its upcoming, all-electric hospitals.

“These are the types of projects which are advancing society and making the world better by using less energy,” Anderson said.

M&A Market

Salas’ increased activity clashes with the overall trends in the M&A marketplace.

“The first half of this year has been challenging for many dealmakers,” according to a global M&A industry 2023 mid-year report by PwC.

Deal volumes this year declined 4% “from already subdued levels in the second half of 2022,” the report said. PwC attributes that to increased difficulty in financing for buyers.

Volumes in the first half of this year, however, remain greater than pre-pandemic levels.

M&A deal values have declined even more than volume, by 12%, according to PwC.

That follows the 36% decrease values saw last year, due to a midyear pause in megadeals.

“Most organizations have paused or are much slower in their merger or acquisition efforts,” Anderson said. “We continue to be very active, no different than we’ve been at any time over the last 15 years.”

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