Consolidation of heritage compliance firms in the United States continues as more and more owner/operators seek retirement and firms struggle to gain market share. Today, the largest heritage-only firms only hold approximately 1-1.5 percent of market share of the compliance sector, now at $928 million annually and forecast to grow to $1.25 billion by 2020. Yesterday, Heritage Business Journal (HBJ) received this press release from ASM Affiliates and Rechtman Consulting announcing a new merger. Company news can be submitted to HBJ from the “Submit Press Release” page.
HILO, HAWAII – DECEMBER 3, 2013 – Rechtman Consulting has been acquired by ASM Affiliates (ASM). Going forward the company will operate as ASM Hawaii. Bob Rechtman will be leading ASM Hawaii as Managing Director for its Hawaii and Pacific operations. The transaction involved the assets of Rechtman Consulting including its existing contracts and proposals. All the current employees have joined ASM Hawaii. Henberger served as the exclusive advisor to ASM. Financial terms were not disclosed.
“Rechtman Consulting’s reputation, its book of business and Bob Rechtman’s desire to join a larger entity, thereby allowing him to focus on his work and his clients, attracted us to this opportunity,” says ASM’s COO Bill Graham, who spearheaded the initiative. “To better serve our existing clients we had been looking for a while to expand our geographic footprint to Hawaii and the Pacific. The addition of Bob Rechtman and his team will allow us to accelerate our ability to meet the needs of our clients,” added John Cook, CEO of ASM.
“I am excited about the opportunities this acquisition provides to me and my employees,” says Bob Rechtman, Managing Director ASM Hawaii. “The cultural resource management industry today requires marketing and financial resources that, as a small operator, Rechtman Consulting was no longer able to afford on its own. I believe that ASM’s values and mine are closely aligned. Together we will be able to better serve our existing clients and expand into new markets that we were previously not able to enter.”
Engineering News-Record recently released its list of The Top 200 Environmental Firms. Published annually, this year’s list is based on 2011 revenue.
|Rank||Company||Heritage Services||Revenue (million)|
|1||CH2M HILL Ltd.||Yes||$3,835|
|3||Veolia Environnement SA||No||$3,294|
|5||Tetra Tech Inc.||Yes||$2,050|
|6||AECOM Technology Corp||Yes||$1,768|
|8||The Shaw Group Inc.||Yes||$1,559|
Half of the top ten firms on the list provide in-house compliance services for heritage resources. On a similar list of design firms, seven of the top ten firms were in-house providers of heritage services.
Unfortunately, what most people want to know about these firms isn’t available: how much of their overall revenue comes from their heritage consulting activities. While most of these companies are publically-traded companies and report their financials, the filings are not fine enough to go down to the level of heritage services. Read more…
A very thoughtful comment was made about HBJ post Employment: Multidisiplinary firms vs. heritage-only firms (18 Feb 2012):
“Large multi-service firms tend hire and terminate for each project because their offices rarely have enough local work to retain technicians. They tend to have centralized full time labs and production centers that do not have positions for techs for after fieldwork tasks. Whereas many hertiage-only company like CRA use full-time technicians in a variety of tasks. The ability to live near a company’s office(s) to come in and do post-fieldwork tasks is the key to full time work. In addition the ability to move techs and other staff between offices reduce the need for temporary project specific techs except for the largest field projects. Plus in any given year we receive enough cold call applicants from technicians with good resumes that simply working the resume file drawer eliminates the need for an ad for most projects.”Steve Creasman and Kay Simpson
A high turnover of technicians in multi-service firms could easily explain why there are more job advertisements from these types of companies than from heritage-only firms. To explore this more, I also took a look at senior positions (e.g. principle investigators, senior archaeologists, office/regional managers) for the same 2011 data set. Of course titles are not standardized across the sector and names can be misleading, but a full 46% of the job advertisements reviewed asked for 10-25 years of experience and 55% asked for 5-9 years of experience (a slight overlap with some asking for 8-12 years). The job descriptions and requirements (years of experience, permits, etc.) firmly place these jobs in the top levels of employment regardless of title. None of these jobs mentioned temporary employment but that does not mean it is not. However, asking for 20 years of experience for a temporary job would be rare but not unheard of (or it should be in my personal opinion). Out of 79 job postings, 61 of them mentioned their employers (some of the job postings have been removed making it impossible to see who was the employer). In this data set the breakdown is even more lopsided in favor of multi-service firms
Heritage-only firms may look for their top-level workers through other means than advertisement such as internal promotion or through professional networks. A lack of lower level positions in multi-service firms may make it hard for them to recruit internally. What these data do show is that the majority of job advertisements for archaeologists at all career levels was dominated by multi-service firms in 2011. Does this mean they get the majority of business? That can not be determined from these numbers but employment may indicate strong growth prospects.
In a recent HBJ post (17 February 2012), Christopher Dore reported that it appears that heritage-only consulting firms are losing market share to full-service firms. To add a different set of numbers to his data, I took a look at the number of job postings for field technicians on the job websites Shovelbums and ArchaeologyFieldwork.com for 2011. Eliminating duplicate posts both between and within the websites, I looked at companies offering jobs for field technicians: a total of 330 separate posts. Jobs were considered separate if the project was different even if the company was the same, six or more months had passed, or it was an emergency hire for a previous job (assumed to be a separate hiring event). If single ads were for multiple positions, the number of positions offered was not counted as most job postings did not give those details. Surprisingly, not every job listing had the company’s details or even the firm’s name on it. Thus, of the 330 unique postings, 295 were used for analysis. Here is the break down of job hiring events between CRM only firms, multi-service firms, and other firms.
In 2011, multi-service firms posted more than twice the number of job ads for field technicians than did cultural-only firms. These employment data seem to support Dore’s observation that heritage-only firms are losing market share to multidisciplinary environmental and engineering companies.
There are limits to what can and should be inferred by these results. There are many small CRM firms that do not advertise for field technician positions as their projects are too small to require a full crew. Though it does say something that the majority of job adverts for lower level positions are being done by multi-service firms. The full data can be accessed here.
A pattern of data suggests that heritage-only compliance consulting firms are losing market share to larger multidisciplinary firms in the United States. Historically, there has been some ebb and flow of market share between heritage-only firms and multidisciplinary environmental and engineering companies. Now, however, there appears to be a more substantial, unidirectional shift and this trend has been underway prior to the U.S. economic recession of 2008.
The annual heritage compliance market in the U.S. has been estimated by many over the last decade to be in the range of $0.8-1 billion. While data to base this market estimate are poor, the fact that many authors (most notably Altschul and Patterson in 2010) have converged upon a fairly narrow range provides some measure of confidence. According to data from Environmental Business Journal, the overall environmental consulting and engineering sector of which heritage compliance is a part was valued at $27.6 billion in 2011. This, then, means that heritage compliance is 3.6 percent of the total environmental consulting sector in the U.S. Since 1991, there have only been two years (1996 and 2009) when the sector did not have positive growth. Since 2009, growth has been 2.2 percent in 2010 and 3.7 percent in 2011. Five percent growth is expected in 2012.
The American Cultural Resources Association (ACRA) has surveyed heritage firms periodically since the end of the recession. In March, 2010 44% those surveyed reported a decrease in business in the six months prior to the survey and 65% forecast that business would not grow in the six months following the survey. There was little change a year later when, in March 2011, 46% of firms reported a decrease in business over the previous six months and 61% forecast that business would not grow in the next six months. Yet, these surveys were done at a time when the industry grew by 5.9 percent, or about $53 million. What explains the opposing trends?
Most, but not all, firms that are members of ACRA are heritage-only companies. Additionally, there were some (29%) non-member firms surveyed but these firms likely fit the same heritage-only profile of member firms. So, the data indicate that while the market for cultural services was growing, the amount of work going to heritage-only firms was decreasing. If heritage-only firms were not seeing the increase, who was?
Data from the U.S. Bureau of the Census (Census) provides a clue. In 2009 and 2010, ACRA led an effort to request a North American Industry Classification System (NAICS) code for cultural resource compliance services. The request was denied and in public comment the Economic Classification Policy Committee (ECPC) of Census stated that “…ECPC considered the proposal and noted that cultural resource management, or cultural resource consulting services is a product provided by establishments in a variety of industries…Therefore, the ECPC does not recommend a new separate industry for cultural resource consulting. ” In short, Census did not establish a cultural resource industry in North America (U.S., Canada, and Mexico) in part because other industries were adequately providing cultural resource services. These other industries were not specified, but the primary “other” must be the Environmental Consulting Services industry (NAICS Code 541620): essentially the multi-disciplinary firms. Anecdotal data from conversations that I have had with a variety of business owners and CEOs over the last year seem to support this observation. Almost all told me that they believe that market share has been shifting from heritage-only companies to multidisciplinary environmental and engineering companies.
Business and industry data directly pertaining to the heritage industry is difficult to find. To identify and substantiate underlying industry and economic trends, one often has to stitch together disparate data and read between the lines. Such is the case with this analysis. That being said, it appears that while the market for heritage compliance services has been growing faster than the rate of economic growth (as measured by GDP) since the end of the recession, cultural-only firms are not seeing the benefit of this growth. Market share for heritage compliance services is shifting away from heritage-only companies to multi-disciplinary firms.
Today the U.S. government released the advanced estimates for 2011 economic statistics. Real gross domestic product (GDP) increased 1.7 percent from 2010 (2010 GPD was 3.0 percent). GDP is, generally, a good proxy for the amount of “undertakings” (Section 106 language) undertaken. This is an important metric for the heritage compliance sector in the U.S. If your firm uses revenue as a growth metric, you should discount your annual growth by 1.7 percent to account for market growth if you want to track your firm’s market share. For example, if your revenue increased by 1.7 percent last year, your market share did not increase because the size of the market increased by 1.7 percent.
Note, however, a couple of other trends. First, industry growth tends to lag patterns of change in GDP growth by 18 months in both directions. That is, when GDP goes up, it takes about 18 months for that change to be realized in the heritage industry. The same is true for a downturn in GDP. This pattern is not absolute, but the correlation is very strong. Second, since 1999 industry growth has substantially exceeded GDP growth on an annual basis in almost every year. For 2011, industry growth was just under 4 percent (as reported by Environmental Business Journal). So, in measuring your firm’s market share for last year, you may actually want to adjust by 4 percent instead of 1.7 percent.
Measuring absolute market share of your firm in the U.S. compliance sector of the heritage industry is difficult because there are not good numbers on the absolute size of the market. However, using change in GDP or the overall environmental consulting industry is a way of measuring and tracking relative change in your firm’s market share from year to year.