• Interested in Sun Belt region targets, but open to other high-growth areas
• Looks for firms with single digits in EBITDA
• Revenue has surpassed USD 100m since VSS acquisition

HFW Companies is harnessing a selective acquisition strategy focusing on small to midsized engineering firms as it looks to expand into new regions, said Sai Parepally, vice president for sponsor VSS Capital Partners.

The St. Louis-based architecture and engineering company is looking for well-run firms in high-growth Sunbelt states like Texas and Florida but is open to other regions with economic or demographic growth tailwinds, Parepally said. It’s also looking at diversifying service lines across public and private markets, he said.

HFW will look for opportunities in high-growth areas regardless of geography, he said.

HFW’s preferred size range for acquisitions is companies with mid-single-digits in EBITDA.

The firm is willing to consider smaller targets with strong brand reputations and growth potential, Parepally said. Those firms would likely be tuck-ins that could offer synergies combined with an existing partnership level firm, he said.

Most industry deals transact at 4x-6x EBITDA multiples. Founded in 2020, HFW has completed 10 partnership-level acquisitions and several tuck-in deals since VSS acquired the platform in 2021. Annual revenue has surpassed USD 100m, and headcount is more than 500, Parepally said.

HFW has made two to three acquisitions each year but hopes to accelerate that pace while maintaining its selective strategy, he said.

The firm’s most recent partnership deal added Texas-based civil engineering firm Southwest Engineers, announced on 8 May.

HFW employs a “house of brands” M&A strategy that doesn’t consolidate acquired companies under one brand but maintains legacy brands and delivery models to preserve local customer loyalty and avoid post-acquisition employee turnover, Parepally said.

Client-facing service remains local while backend functions like finance, recruiting, and IT are integrated for efficiency and scale, he said.

CEO Mike Hein co-founded the company with CFO Dan Forguson and COO Matt Westphal, who wanted to create a professional services firm that grew with an alternative M&A strategy compared to industry consolidation models, according to the company website.

VSS acquired the venture in November 2021 in a deal accompanying HFW’s first acquisition. Parepally said the architecture and civil engineering industry is in the early stages of consolidation and is expected to benefit from population growth, migration, and the nation’s infrastructure degradation.

Asked about exit possibilities, Parepally said the focus now is on HFW’s growth.

Acquiring firms in diverse geographies and end markets such as education and healthcare provides the platform with economic buffers against market and macroeconomic fluctuations, he said.

UB Greensfelder provided legal services for the Southwest Engineers deal. Armanino provided accounting due diligence.