A/E Coronavirus Impact Bulletin
For the duration of the Coronavirus pandemic, Morrissey Goodale will provide A/E leaders with news and perspective on the coronavirus and its impact on our industry.
WORD ON THE STREET
Real time market and industry intelligence during the COVID-19 crisis – May 4, 2020
A weekly sampling of what the Morrissey Goodale team is hearing from A/E leaders around the country and seeing in our strategy, M&A and executive search work. To see last week’s report click here>.
COGNITIVE DISSONANCE – THE NEW MANAGEMENT PARADIGM
National Industry News
- Cognitive dissonance: the new management paradigm. From Alabama to Alaska and from California to the Carolinas, leadership teams alternate between two polar opposite mindsets on a daily basis. On the one hand, they are busier than ever and are feeling good about successfully navigating massive, never-before-contemplated operational turmoil (remote working + different state regulations and re-openings). At the same time, given the unprecedented nature of the crisis they are compelled to consider every conceivable economic scenario – including the worst case – for the second half of the year and 2021. Leadership teams report feeling equal parts optimism and anxiety.
- A four to eight month lag between downturn and business impacts is the planning horizon for many leadership teams based on how their firms have been impacted by past recessions.
- Your 2008 recession playbook is out of date. It doesn’t factor in the attributes of your Gen Y and Gen Z employees. Cut them now and risk losing your viability as an “employer of choice” going forward. The decisions you make in the short-term about your workforce will be amplified through social media and become part of your brand.
- You better have been taking care of your clients when the times were good. We’ve heard multiple reports of firms who are super busy with work that they won in 2019 from competitors who took those clients for granted.
- More warning signals appearing on dashboards. While May and June continue to hum along, more and more firms are seeing more projects delayed or cancelled, impacting top lines about 5%. States, municipalities, institutions, corporations and developers are getting concerned about a cash crunch ahead and are providing little if any guidance.
- But outlooks vary by region. In the West, South and Southeast there is a palpable sense of optimism/confidence/momentum. Positive reports from Florida, Texas, Louisiana and California. In the South and Southeast employees are gradually moving back into offices. California construction coming back online this week will be a huge boost. A common refrain in these regions is that firms are hiring and are struggling to meet demands.
- Regional variations in states reopening and regulations are providing a management headache for some national and multi-state firms, and in some cases, exposing cultural misalignment. The antidote: CEOs who are great communicators.
- Selected markets remain strong. Multiple positive regional reports about robust demand for design and environmental services in public works, heavy rail, industrial, hospitals, military, DOD, VA, K-12, community college and higher education markets. Vacant facilities in the latter three markets provide a great opportunity to get on-site work done.
- Development and other markets mixed: Some national home builders have stopped while others are continuing full steam ahead. Mixed use projects vary depending on region. Aviation/airport work is mixed depending on region and whether passenger or cargo facilities are involved.
- Retail and hospitality markets amongst the most challenged. Except for retailers like Target and Amazon that going to emerge from the crisis stronger than before. Services related to property transactions are also being hit.
- U.S. mergers and acquisitions down 11%. Click here>
- Many deals continuing with savvy buyers who are using more virtual due diligence methods. Deal valuations continue to hold up.
- While deals are down, they’re not out, but they certainly are different. Whether you’re a buyer, seller, or investor join us for our special livestream U.S. A/E M&A Symposium: Deal-making in turbulent times on June 11.
- Things that make you go “hmmmm”. In addition to all the thought pieces on what the post-pandemic workplace may look like, the crisis is giving rise to multiple questions. For example, how will the population feel about taking mass transit in the future?
APRIL A/E COVID-19 IMPACT SURVEY RESULTS
Feeling the pinch. While the A/E industry continues to hold its own in the face of an unprecedented health and economic crises, signs that work is beginning to slow down are emerging. When asked to indicate the change in workload in the last two weeks, approximately two-thirds of firms report moderate or significant decreases compared to just under half in March.
More remote full-timers. Half of employees are working remotely full time, up more than 8% from March. Those working in their offices more than half of the time or full-time dropped 3.5%.
Transition to remote A/E workforce smoothing out. Nearly 80% of respondents say their experience working remotely is working well, up nearly 11% from March. The percentage of those saying they are still struggling or are behind the curve dropped 1.6%.
Predictions lengthen for how long the crisis will last. In March, nearly 20% of respondents believed then crisis would be over by the end of April and more than one-third believed it would be over by May. None of the respondents thought it would last longer than 15 months. Now in April, more than 45% of respondents believe the crisis will have subsided by the end of June and more than 20% believe it will last longer than 15 months.
- Nearly 46% of respondents indicate their firm received a Payroll Protection Program (“PPP”) loan from the Federal Government.
- Just over 20% of respondents forecast a moderate increase in workload over the next 90 days; 12.5% predict no change, 50% predict a moderate decrease, and nearly 17% are planning for a significant decrease.
- Biggest concerns include replenishing backlog, demand for services for the rest of 2020 and into 2021, employee safety, and developing effective remote sales strategies.
Jun 11, 2020 • Livestream Event
Deal-making in turbulent times:
For AE and environmental buyers, sellers and investors navigating the new normal.