Acquisition has been a key component of construction-firm growth strategy in recent years. Recent surveys indicate that economic and political uncertainties have slowed the buying and selling trend in 2012, which makes attention to risk factors in an M&A deal all the more critical.

PricewaterhouseCoopers reported 30 global engineering- and construction-sector deals (those worth $50 million or more), for a total of $11.8 billion, in this year's third quarter ending Sept. 30, compared to 52 deals worth nearly $22.7 billion for the same quarter last year.

H. Kent Goetjen, PwC's E&C sector leader, says the global economic slowdown and sluggish U.S. recovery "have resulted in a wait-and-see attitude among potential acquirers, a hestitation that was evident across all ranges of deals."

R. Huntley Davis, vice president at FMI Capital Advisors Inc., notes "a more difficult road to get deals done."

Davis notes more interest in backlog risk, such as the amount of work in slowing federal markets and the status of project funding and bonding capacity. "It doesn't matter if [a potential acquisition] made money last year," he says. "You have to look at customers and market sectors and whether it has multiyear contracts and strong relationships in the sectors."

He also points to the status of claims, noting one example of an FMI-brokered deal where "the buyer had less confidence in the seller's ability to collect."

Davis adds that boards of directors or possible lawsuits brought by shareholders can be big risk factors in M&A transactions. "How does the board act when considering offers?" he says.

Goetjen notes that in today's uncertain market, it is equally critical to determine retention strategies for key employees "to recover the investment" and to properly estimate costs of completing the deal and funding future growth. "Do the cultures mesh? The more decentralized the firm being acquired is, the more difficult it is to merge," he says.

In a 2010 report on contractor acquisition strategy, FMI noted that some buyers let an acquired firm "operate entirely as an independent subsidiary," while others favored full integration. "While either strategy will work, successful acquirers make a very conscious decision about where their strategy falls," said the report.

Some insurers, such as Zurich and Willis, offer M&A-related products, "but I've not heard of their use in practice," says Davis.

The firms also tout due diligence and M&A consulting services. Willis says its M&A practice extends globally to 10 European countries, China, India and Australia, among others. "By identifying potential areas of exposure, we can help both vendors and purchasers plan for future contingencies," says the Willis M&A practice website.

"The financial risks, such as pricing, backlog, markets, etc. actually are the easiest to quantify and manage," says Steven T. Halverson, CEO of The Haskell Co., Jacksonville, Fla., which recently made one acquisition and expects to close another in December.

"The biggest risk is cultural integration. Failure to properly integrate cultures could destroy all the value in the firm you acquire and more. You aren't just adding another company, you are changing both companies," says Halverson. "Done well, you grow the company, grow your people and change your competitive profile—something every company must find a way to do."