Hill International Inc., the Marlton, N.J.-based construction claims firm turned global construction manager, announced Dec. 5 that it has agreed to merge with Arpeggio Acquisition Corp., New York City, to facilitate its plan to go public.

Arpeggio is a "special purpose acquisition" firm trading on the NASDAQ exchange that was organized "solely for the purpose of going public, raising funds and then looking for an acquisition or merger partner," says Irvin Richter, Hill chairman and CEO. It has no operations but has $37 million in cash. Under the deal between the two firms, Hill shareholders would receive 14.5 million Arpeggio shares at closing, and would own nearly 64% of the combined company. They would also receive an additional 6.6 million shares if the combined firm met key earnings targets through the end of 2009.

The deal is set to close next spring, says Hill President and COO David Richter. Eric Rosenfeld, Arpeggio chairman and CEO, would join Hill's board, as would two other Arpeggio executives.

Despite trends in the engineering and construction business about going public, Hill looks to catapult its growth further by taking that step, says David Richter. He says the firm has grown from a $25-million-a-year claims firm a decade ago to a major construction and program management firm whose total revenue could be at least $100 million this year. CM work now makes up 82% of that. Hill officials say the additional capital would fund new company acquisitions in the U.S. and abroad. "We want to become a best-in-class program management firm," says Richter.

Richter says the firm chose this approach to go public as opposed to the more traditional initial public offering (IPO) because it is faster and less risky. "Nearly 70% of those who start the IPO road don't get there," he says. He adds that with a special purpose acquisition firm, "you negotiate the price on day one."

But some observers still see risk in the approach. "I've never heard of this is our industry," says Andrej Avelini, vice president and principal of EFCG Inc., a Manhattan-based management consultant serving the engineering and construction sector. "If they're confident in their future performance, it will be a good deal," he says. But he cautions about risks Hill may have in how much interest the public market would have in buying shares after Dec. 31, 2007. Company executives have agreed not to sell before that date.