...coming from new investments [by employees].” He says this could have drastically limited the amount the firm would have been able to raise from employee investment.

AECOM spent a lot of time encouraging employees not to overinvest in the firm, suggesting they put their money in popular mutual funds. Because of the legal structure for IPOs in 2003, employees actually voted on whether to approve that offering. Nine out of ten favored going public. But when AECOM decided to pull the plug, “e-mails came flying in saying, ‘good decision,’” says Newman. “Engineers like consistency.”

By the time AECOM moved to go public again, other market changes were driving the company toward its IPO. Until 2005, the trust that owned the stock under the firm’s employee stock ownership plan counted as a single shareholder and the company did not technically pass the 500-employee shareholder trigger that requires a firm to file reports with the U.S. Securities and Exchange Commission.

AECOM Towers in the Middle East (above) and a highway in Australia (below right) help AECOM earn almost 40% of its revenue outside the U.S.

The company’s overseas acquisitions also helped keep the number of employee shareholders technically below the threshold. Non-U.S. acquisitions, such as Canada-based Cansult Maunsell, which operates mainly in the Middle East, often required that employee shares in AECOM remain in a trust.

But as AECOM began shifting its acquisition strategy to different business lines, such as economic development, urban design and landscape management, “we knew, back in 2005, that it would be likely that some U.S. merger partner would be joining us, and in that case, we would go over 500 employees and likely be publicly registered, although not necessarily traded,” says Dionisio. “So we got dressed up for the dance” by preparing to do SEC filings and complying with the new and complex Sarbanes-Oxley requirements, he says.

With the acquisition in December 2005 of EDAW Inc., the San Francisco-based planning firm, AECOM crossed the threshold of more than 500 employee shareholders and were required to publicly report its financials.

AECOM

By this past January, AECOM decided to look at other variables and had not yet committed to an IPO. The firm had successfully replaced one set of private equity investors with another, but eventually the board took up the IPO issue one more time and decided it should  move forward.

AECOM reported net income of $54 million on its 2006 revenue, and through the first half of 2007 it is showing sharply higher figures for both. The company says it plans to reduce its generous stock match for employees, adding millions to earnings each year, but it has not said publicly exactly what that match will be.

Decisions

With IPO proceeds of about $472 million, AECOM says it will use $160 million to pay off debt and another $75 million to fund employees cashing out more of their company stock. That leaves more than $200 million for acquisitions, which the company has always been able to finance from its cash flow or from additional borrowings.

But the new funds provide 200 million more reasons to believe that industry consolidation will roar forward for the next several years. AECOM executives expect to buy up market share, particularly in the environmental sector, and add to overseas operations.

The integration of Metcalf & Eddy Inc., the Wakefield, Mass., water and wastewater engineer acquired in 2000, was a particular success. “In the past, M&E had parents that did a lot of damage to the firm because they didn’t want to be in certain markets. M&E was the firm with the fewest number of stockholders because employees were always wary of what the parent was doing,” says M&E CEO Steven D. Guttenplan. “But AECOM has done the best job.”

Other companies are out there weighing the prospects of a merger or acquisition. Recently, Richard Shaw, CEO of Pittsburgh-based Michael Baker Corp., speculated that his firm might be better off if it merged with a similarly sized company to create a single, $1-billion-a-year firm. Only very large or very small companies will remain and those in the middle will be merged or gobbled up, he said. But other firms aren’t interested. “AECOM talks to everybody,” says Robert Uhler, CEO of environmental and infrastructure firm MWH, Broomfield, Colo. “They talked to us, but we don’t want to sell.”

AECOM hardly had time to bask in the glow of its successful IPO before news media carried word, on the May 28 Memorial Day holiday, of another deal:  URS Corp.’s surprising acquisition of Washington Group International. URS has been an anaconda as a consolidator, swallowing big companies and then taking a long time to digest them.

AECOM has another style, picking up smaller companies at a steadier pace. After the IPO euphoria subsides, will the company’s fundamental culture change? “Nothing changes,” says Dionisio. In case anyone is wondering, AECOM stock closed Monday, June 18, at $26.