Ep. 14 | Ending the Scavenger Hunt: Data as an AEC Valuation Lever

Your firm’s balance sheet tells your earnings story, but your data archive is your firm’s memory. If that memory is trapped in an unsearchable digital graveyard, you’re leaving significant deal value on the table. 

In this episode of AEC Unscripted: M&A Edition, host Jeff Adams, Director of M&A at Stambaugh Ness, is joined by Nick Decker, Director of AEC at Egnyte, to discuss the critical intersection of AEC valuation and data.

Nick shares a frontline perspective on why “tech-ready” firms are commanding higher multiples and how leadership teams can turn their data environments into a strategic advantage rather than an operational risk. 

This podcast discusses: 

• The “20% Tax”: Why billable engineers spend one day a week on a “scavenger hunt” for information—and how to fix it.
• The Closing Dinner Snub: Why IT leadership belongs at the table before the deal ink dries.
• The AI Gap: Moving AI past “writing emails” and into actual project delivery, drafting, and closeout. 
• Matching Blood Types: Why tech integration is a talent retention issue, not just a software transition. 
• The Five-Year Outlook: What will separate the most valuable, scalable AEC firms from the rest of the market.

Whether you’re preparing for a sale or looking to maximize synergies on the buy-side, this conversation explores how to move beyond simple storage to unlock the true intellectual property of your firm.

 🔔 Don't miss out! Subscribe to AEC Unscripted: M&A Edition on your favorite podcast platform. Let's explore the M&A landscape, unlock growth potential, and achieve deal success. Ready to dive deeper? Let's go! 🤝💰 

Transcript

00:00 – [Intro Music]

00:25 [Jeff Adams]: Welcome to AEC Unscripted. I'm your host, Jeff Adams, the director of Mergers and Acquisitions at Stambaugh Ness. Today, we're going to be exploring M&A through the lens of a data guru. I'm delighted to have joining me for this episode, Nick Decker, the Director of AEC at Egnyte. Egnyte works with architecture, engineering, and construction firms to help them securely manage project data, improve collaboration across distributed teams, and strengthen governance around one of their most valuable and often overlooked assets, information.

As M&A activity in the AEC industry continues to accelerate, data organization, security, and operational scalability are becoming increasingly important factors in both valuation and post-transaction integration. Nick brings a frontline perspective from working with firms navigating growth, private equity investment, and acquisitions, helping leadership teams turn their data environments into a strategic advantage, rather than an operational risk.

Nick, thank you so much for joining me today, and welcome to AEC Unscripted.

01:36 [Nick Decker]: Thanks, Jeff. Pleasure to be here.

01:38 [Jeff Adams]: Well, hey, before we dive into today's topics, please tell us a little bit about yourself and about Egnyte.

01:45 [Nick Decker]: Yeah, so, my role here at Egnyte is to, as you stated, work very closely with our strategic engineering firms, primarily around their ability to execute their projects more efficiently. So, within the A&E space, how that manifests is through their ability to get the right data to their users as efficiently as possible. It allows them to make the most of their institutional knowledge.

The firm intelligence that they built up over decades, as it pertains to the M&A world, we're seeing a lot of adoption of tech as an accelerant within the M&A frame. And folks are looking strategically at their tech stack and saying, from the sell-side, how can this help my evaluation, my multiples, if our firm is ready for this next generation of technology, if you will.

And from the buy-side, it's all about how can we get the most out of our investment? How can we unlock, the most synergies and, the intelligence of the firm we just acquired? There's a lot to unpack there, but as far as Egnyte as a company at its simplest was started as cloud file storage. And we've continued to evolve that to include things such as, data security for highly sensitive markets. And then, this AI front over the last two or three years has really put the acceleration of our product line specific to what engineers and architects and even construction firms do on a daily basis.

03:13 [Jeff Adams]: Great, and we're gonna dig deeper into some of that through our conversation today. So, let's get started here. You know, one theme that we keep hearing in transactions is that IT gets invited to the table last oftentimes after the deal closes. Why do you think technology consistently shows up late in AEC transactions?

03:35 [Nick Decker]: Yeah, I have a lot of conversations with folks in the industry around what they're doing in the M&A market, and IT is always an afterthought. It's always, oh, well, we'll handle that during the integration phase. Like, we have to get to deal close, we need as few distractions in the diligence process as possible.

And really, the firms that have taken the inverse approach there, saying, technology is the DNA and culture of our company. Frankly, a professional services firm, the way in which you collaborate is your intellectual property. It is the way in which your business operates. In most instances, you're not buying yellow irons in the worlds of...

04:12 [Jeff Adams]: Mm-hmm.

04:13 [Nick Decker]: ...construction. And so what else is there other than the intelligence in the people's heads that are sitting, delivering the services. Right. And so, unfortunately IT has not been seen as a strategic lever in that diligence process in the pre-transaction.

The firms that are starting to look at technology as that accelerant are: one, moving faster through the integration process. But two, they're also, out competing their peers, whether on the buy-side or sell-side. Because they have something unique to tell as far as the story of the market. And it's not just, "Hey, here's our balance sheet and here's our client list." Take it or leave it, if you will.

04:53 [Jeff Adams]: Sure. So, what actually happens inside a firm when IT integration starts post-close?

04:59 [Nick Decker]: Yeah, so one of the biggest things is that you have to go through the table stakes process. You have to get everyone into secure platforms, and you have to give them logins and, new computer or however you wanna go through that process. And that's never going to change. But, what is, flipping on its head is how quickly a firm can be integrated from a collaboration standpoint.

So again, we talk about project delivery, a lot of that is how your engineers or your architects can talk to each other within the context of project. And even a couple years ago, the baseline number for integration was 18 months, where from a tech standpoint, your firm was not fully integrated into the new parent for 18 months before you could deliver a project together.

05:44 [Jeff Adams]: Hmm.

05:44 [Nick Decker]: That's wild. Because now, we have clients that are coming to us and saying, "Hey, we have to integrate from day one. We need this key engineer on this project. In order for us to be successful," and so on and so forth. Like, we have two days to figure this out. Go. And that's really only possible if you're getting them into the core systems.

You're getting them into the documentation and allowing them to function as a core part of the newly acquired entity, if you will. That integration waterfall map, the schedule that people used to take as gospel. It used to take a quarter to do this and a quarter to do that. Now, what used to take a quarter, now takes a week. The acceleration is happening incredibly fast, and...

06:25 [Jeff Adams]: What's driving that acceleration? Frankly, there's pressure to get more from your multiple. Mm-hmm.

06:29 [Nick Decker]: From a buy-side standpoint, we're all aware that the multiples have gone up and in order to make it make financial sense, you have to get synergies faster. You can't wait for a three-year payback on these engineers getting up onto the projects and so on, so forth. You have to be able to upsell, cross-sell, be able to show your worth as a cohesive firm, and not a constellation of offices. And that's something that oftentimes gets overlooked is you're not just buying a headcount, a 50-person firm is not just a 50-person firm. You also have to put to work their reputation, if you will.

07:09 [Jeff Adams]: Mm-hmm.

07:09 [Nick Decker]: And be able to win over new clients and make the existing clients happy.

07:16 [Jeff Adams]: I hear disruption, right? When we're starting to put these teams together, a lot of disruption going on. Where would you say engineers and project teams feel disruption the most?

07:26 [Nick Decker]: Yeah, I think, when you're being acquired, there's inherently going to be this this angst of what it is that is expected of you, and what is this new firm gonna look like, and so on and so forth. There's already enough disruption when it comes to M&A market. You pile on this concept of a cloud collaboration or working with new tools that is wholly and completely different from the way you've worked out of files and folders and emails for a long period of time.

And then obviously that goes to the next level with AI. The looming changes to the industry here. That's just so much change to absorb. You know, I kind of relate it to an organ transplant. In order for an organ to be accepted by the body, there needs to be a matching blood type and the...

08:13 [Jeff Adams]: Mm-hmm.

08:14 [Nick Decker]: And I think that is amplified even further when you talk about matching technologies and making sure that you're non-disruptive to employees that are already very concerned about what this new market may look like. Both, again, from an M&A standpoint and a technology. I'd be happy to go further into what those technologies are and what may be most disruptive, in the near term versus long term.

But as of right now, it's just a matter of keeping people in seat and as productive as possible and not scaring them away. The angst is high enough as it is in the industry without piling on more concerns.

08:51 [Jeff Adams]: Yeah, we might dig deeper into that a little later on here. As we move through the process, if firms could change one thing about timing, when would you say IT should enter the M&A process?

09:02 [Nick Decker]: Yeah. the rough goal, so to speak. You hear about closing dinners, right? Like

09:08 [Jeff Adams]: Mm-hmm.

09:08 [Nick Decker]: You know, who is at the table at that closing dinner to celebrate the new acquisition. Usually, neither CIO is at that dinner. And that's usually like a tell of how important tech is or isn't within this process. Yes, you'll have the mergers and acquisition team from both sides. You'll have the existing buy- sell-side leadership and HR folks.

09:28 [Jeff Adams]: Great point. Yeah.

09:29 [Nick Decker]: All very valid. Tech's never quite literally at that dinner, at that table. I think, as part of the diligence process, tech needs to have a seat at the table. They need to be ensuring that there is a match between the two firms, and if there's not, that's okay, but you need to be able to mitigate that somehow.

And that needs to be calculated into the financial models, if you will. The flip side of that is also true in that tech can be an accelerant and make the acquisition more valuable. And what that means for unlocking intellectual property and stuff. Again, there's a lot to be said on that topic. But it is something where it will only become apparent if both tech teams are sitting and allowed to collaborate before the transaction takes place.

10:16 [Jeff Adams]: You bring up a great point there. I mean, we've been talking about you know, integrating systems thus far. But you mentioned Intellectual Property, and when we talk about IP and AEC, what are we actually referring to?

10:30 [Nick Decker]: Yeah, I think, the pithy quote here is: in AEC balance sheet, is your firm's earnings. Like, that's the financial sense, but the archive that the data that you have is the firm's memory. If you're not putting that memory to work, you're not getting the most out of this acquisition. What that tactically means is how you deliver projects, who you're delivering those projects for, what you're doing, and what was successful, and frankly, what was learned within that project delivery cycle.

And that needs to be recycled into the future. If you're just acquiring a firm and you're putting all of their legacy data off into a storage bucket somewhere, and you're never touching it again. You are leaving a ton of value on the table. What I tell people is that information needs to be searchable by every engineer architect. It's not just that this is accessible; it needs to be searchable. But, that this also needs to be indexed and made intelligent in a way that can be shareable.

So what that means, there needs to be a compiled list of lessons learned over the history of the firm. There needs to be a compiled list of what clients are doing projects for, what project types are created, who are the firm's experts. That's often missed. I live in Indiana, and there's a crazy number of roundabouts around me. Like, who is the firm expert for doing roundabouts within Indiana DOTs? That's a tactical example. If you go acquire a firm and you don't know who the expert is within that, without that domain expert, you're not tapping into the expertise of the firm that you paid a high price for just now.

12:08 [Jeff Adams]: Yeah, absolutely. Alright. You mentioned the term indexing a while ago, indexing, structuring your data, and you were touching on that a little bit, I think, with some of your examples there. What do you mean by that?

12:19 [Nick Decker]: Yeah, so the industry, unfortunately, has always been at the mercy of files and folders, and this goes back to paper days, like, filing cabinets used to be a thing. They still are in some instances, and if you don't have a Dewey Decimal system, you don't have a way to understand what is in which filing cabinet. You have no way to go find the information that you need in the moment in time.

The same thing holds true in the digital world. Um, you know,if I go search in your files, Jeff, I have no idea where I'm gonna find anything. I don't know how you structure your folders. I don't know what your file names mean. There's no intelligent way for me to understand quickly. And so I'm gonna abandon that task and I'm just gonna start from scratch. Unfortunately, that's the wrong way to approach it.

And being able to understand what's inside the files, inside the data is where the magic happens. And so, in today's world, that's actually really easy to do, to allow, cloud software to index inside the files and make everything searchable. So the tactical example is. Where have we done a project for this client in the past? How did it go? Some of that may live in a CRM. A lot of that's gonna live in an email inbox. Some of that's gonna live in a file structure. But if I don't have the ability to go search for that, the way I do searching in Google for a website, I'm not going to tap into that information. I'm just going to start from scratch. And that's really what we're trying to get over as far as the technology standpoint is allowing people to leverage what already exists, right? And be able to start from 80%, not from zero.

13:57 [Jeff Adams]: Well, if I were being completely honest, when I think about how I organize my personal files, I feel like I do it with a certain degree of logic and try to be very careful about it. But when I'm looking back at it, whether it's to walk somebody through something or I'm trying to find it myself, I realize I'm not very good at organizing things. It's very challenging to find even my own data. But yeah, when you're talking about the world of M&A and you're acquiring someone else's data that's been collected over years by different people and now you're trying to work through that definitely can be challenging.

Even in today's world now, one common theme I hear somewhat related to this is all the different communication platforms we have nowadays. Right. Outlook. Teams. I mean, heck, even inside Teams, there's Chats, there's Teams Channels, right? Trying to remember what you're on. You get on your client's Teams channels. Sometimes it's not just your own and you're people texting you. You're trying to remember where in the world did I see that? Yes, I know I came across something related, but you can't find it. So yeah, this whole concept of being able to index and make it searchable.

15:05 [Nick Decker]: Mm-hmm.

15:06 [Jeff Adams]: Is the word you used while ago, right. To be able to find it.

15:08 [Nick Decker]: Yeah. That's absolutely the case, and everyone can feel it, from their personal lives like you say, whether it was text, whether it was, an email, a teams chat, what have you, amplifying this in the project delivery world, people roll on and roll off of projects as well.

15:25 [Nick Decker]: So, in addition to all of the fracturing of the systems themselves, is the additional permutation, if you will, of who that communication was with. So you can imagine, you know, email is the easy example. Did Jeff roll off this project? Oh no. Well, with Jeff went all of that contextual knowledge about what happened within that project. Did we file Jeff's emails? Did we capture all of his Teams Channels and so on and so forth? Probably not.

And so being able to connect those systems as best as possible, look a little bit into the future of connectivity with these systems, protocols within the AI world called MCP, and some of these other things are making this easier. It is allowing for a more dynamic kind of rolling process of being able to query the Teams Chat, as well as the Outlook inboxes, the project management system, as well as the file system, and so forth, and do so much more easier, but it's still not perfect in the sense that you still have the human component. Did they put the stuff in the right location, and so on and so forth.

The other component that I do wanna bring up here very quickly.

16:28 [Jeff Adams]: Sure.

16:29 [Nick Decker]: Is the aging workforce. So, you know, we talk about this generation of folks who have a really rich context of decades of being in the industry. They're about to retire.

16:41 [Jeff Adams]: They are.

16:42 [Nick Decker]: You lose all of that context as soon as they walk out the door, unless you're capturing it in a way that's searchable for the next generation. You know, we have young engineers that need to come on board and need to learn quickly, and if they don't have that Yoda, so to speak, that guru, that's gonna tell them how to do the work, they're going to have to take two decades in order to catch up. But we can compress that down and allow for that knowledge transfer to happen much faster, both within the context of a project as well as a career. I'm very excited about that concept of like knowledge management within a firm, as well.

17:16 [Jeff Adams]: Well, I think our listeners probably are feeling and sensing the pain that you're describing here and can relate to it really well. You were mentioning a while ago that when firms didn't index or structure their data, it gets lost. Right? In the world of M&A, it just gets lost. People come. People go. Those relationships come and go. And all that data that was gathered over the years through that, if it's not properly stored, searchable, and structured in a way to make it retrievable to future, let's call it generations of employees, it's lost. Mm-hmm. As if it never existed. So, yeah, I think what you're saying there resonates big time, I think for a lot of people.

18:01 [Nick Decker]: Yeah, as an engineer myself, I didn't go to school to do scavenger hunts. That's really not what the job is. It's to go build a bridge or, design a building. And that's what gets me excited. Varying statistics in the industry will tell you an engineer spends about 20% of their time looking for data. That's within their own firm, in their own projects, that they already know really, really well.

Amplify that for someone's new systems, new data. You are already nervous about an M&A acquisition, both on the buy and sell-side. How do you make that not a scavenger hunt? We have the technology that the $6 million man, we have the technology to make this happen. Why are we still reliant on this disjointed way of operating our business, is really kind of, the dichotomy that the industry's at.

And I will say the firms that are pushing the limits, they're getting acquired much faster. They're getting acquired for a higher premium. The firms that are on the buy-sides that are doing this from day one are doing a much better job. And able to take on more acquisitions more quickly than their peers.

19:11 [Jeff Adams]: Talk about some of these tools, Nick, that you're talking about, that can structure this data that way and help you avoid the scavenger hunt. I love that term. I think that accurately describes the pain many of us feel.

19:22 [Nick Decker]: Yeah, I think tactically there's a few things at play. One is. Frankly, just moving off-prem into the cloud. So if you're familiar with SharePoint, you're familiar with your personal Google Drive or Dropbox or what have you. Those technologies, when you go to search for something, it's also looking inside the file. So back in the nineties, early two thousands, there was a concept of very heavy enterprise content management, tagging of files. What type of file is this? Who edited it last? Technology has been able to extract a lot of that away, make those system tags, and do a lot of that behind the scenes.

Same thing with scan PDFs. think about all of the old files after a project you had a banker's box of physical paper, and now you have to go scan that in. Well, that was never searchable. Someone had to go manually name that. We're now able to read that page through technology like OCR, which is basically making that scan text readable, that's all baseline stuff. A lot of that's been around for well over a decade, and that's great. That's the starting point to be able to look inside Excel files, PowerPoints, Word documents, so on and so forth.

The next generation of this is indexing the design files themselves. This is things like, again, reports, BIM and CAD models. This is things like GIS for photogrammetry, so being able to look inside of a photo and see where it was taken. I don't know if you know this, but when you take a photo, whether it's through a drone or through your phone, the system actually knows where you were located when you took that. That type of stuff is now searchable.

And so I can say, "Give me all of the pictures in Carmel, Indiana or in San Diego, California." And it will give you context of just the photos within that. The next iteration of this is making that contextually aware and connecting those systems that we talked about. So what used to be a very bespoke integration with things like, connecting my email server back to my file server, and so forth. It used to take IT six months to make that happen.

I can now do that with a click and say, add connector to my Outlook inbox. And I can search inside my email, inside my calendar, inside my file system, and inside my Microsoft Teams or my Slack, all from one search bar in about 10 seconds. And that is absolutely an amplifier. If you know me as one user, I'm one of a thousand in this firm, can now all do that.

That's where the rubber meets the road. And that's what used to take 20% of my time to find that information, which is one day a week. Finding data, doing the scavenger hunt, can now be compressed to maybe an hour, maybe less. That's real time savings. And we went from eight hours billable to maybe one hour, of increased productivity, and that shows up in the bottom line. That is a very real thing that can be value capture to the firm.

22:17 [Jeff Adams]: Yes, it can. So let's transition here and talk about AI for a little bit. So once data is structured, AI suddenly becomes possible, and we're seeing that affect acquisitions. Where are you seeing real AI applications inside the design firms today?

22:35 [Nick Decker]: Yeah, AI is a muddy term right now in the industry. I think,

22:40 [Jeff Adams]: Yeah, it is.

22:41 [Nick Decker]: Your listeners, when they hear that acronym deju AI. They're thinking, oh, well, ChatGPT, it helped me plan my kids' vacation or spring break. I just asked it where I should go to dinner with my wife, for date night or whatever. That's fine, but that's not productive. That's not,

22:56 [Jeff Adams]: It's pretty good at that, though.

22:58 [Nick Decker]: I mean, you know. It is, it is pretty good. And I can't complain. That's a nice, uh, starting point. But the reality is we as an industry have what we call a gap or an exposure, overhang, where AI in theory can do 60 to 70% of an engineer's task and an architect's task. We as an industry are adopting AI at about, depending on who you ask, 5% to 20%.

23:25 [Nick Decker]: So we're talking about a 40 or 50% gap of time that can be automated. In theory, what that tactically looks like today is things like templating reports. So I go out into the field, capture a bunch of information, and I need to then type it up in a report. I'm probably pulling a template. I am starting from scratch. I'm hand typing everything out. That's fine. But that can, be at least, get set to an 80% draft by just uploading the photos and saying, tell me what's in it. Here's the location and the context that I'm working in. Go and give me a draft back to my corporate template.

It's not replacing the engineer, but it's getting them from the 0% or the 10% starting template to an 80% draft and allowing them to focus on that last 80% and do the validation trust, but verify. Same thing holds true when we talk about project closeout. So no one ever thinks about project closeout as an opportunity for improvement because oftentimes you're under a deadline to get things out by 5:00 PM on a Friday, in order to meet contractual deadlines, and then you show up Monday the next week, and you're onto the next project and you haven't properly closed out and organized that information and captured that intelligence.

That's a net new capability that AI can also benefit your firm. And that's things like organizing the data, capturing lessons learned. So it can read through your emails and say, "Oh, well it looks like we had issues with this well detail on this particular file." "Hey, maybe we need to pull this back to the content library team in order to do that more efficiently moving forward." Stuff like that. It's not just about the tasks of the day-to-day engineers, it's the net new capabilities as well that often get overlooked.

25:12 [Jeff Adams]: Hey, you mentioned AI could be used 60 to 70% of the time, but we're only seeing like five to 20% adoption. Why the resistance in the industry to adopt AI do you think?

25:25 [Nick Decker]: Yeah, so there's a couple components here, around why AI is not adopted as it could be. A lot of this, frankly, technology has moved so fast over certainly the last three years, but even more so over the last six to 12 months that the workflows and the processes are not quite caught up to where technology is today, and that speed will only continue to increase.

There's also, to be totally honest, there's the complexity of professional liability. We, as engineers, as architects, as contractors, have an obligation to stamp our documents and be held liable for the contractual deliverables that we're providing in this project. And because of that, we have to be very, very careful. This industry is highly conservative, rightfully so.

26:15 [Jeff Adams]: Mm-hmm.

26:16 [Nick Decker]: But it's not about delivering an AI output, that's low risk. It's about getting people from a 0% draft to an 80% draft. And I think that's where that delta or that gap is really easy for us as an industry, or easier, to go assign. As an engineer, I should never be starting from scratch on anything. I should be copying and pasting. I should be using AI to get to a closer draft. The industry as a whole is much more comfortable doing proposals and back office. You talk to almost every CEO they're saying, oh yeah, we're using AI.

Our proposals team will do drafts in Microsoft Copilot and they make PowerPoints, and we're great at AI. That's fine, but that's not what's making you money. To be totally frank, you don't get paid for proposals, you get paid for the delivery phase. And the industry is not caught up to what you can do within the delivery phase. That is not going to expose you to any additional risk, but is going to save you a heck of a lot of time.

And that is things, again, like drafts, like research, code compliance is a really big one, working within a waterfall of different codes and requirements within your locality, your municipality. Have AI do the research for you and give you a first draft of what your project can and should be within the context of the region in which the project is. Those types of things are not at the adoption level that they can and should be. And I think hopefully the industry looks very different six months from now.

27:58 [Jeff Adams]: One common thing I hear around this, Nick, is that you say people that start out right, when they first come in, let's say just whether it's engineer, architect, or really any skill. When you first enter the workforce, you are doing the entry-level jobs, let's call it. Right? And that's where you learn, that's where you own the job. Training happens and all. Now we've got AI technology that comes in and says, "Hey, let it take care of 80% of that." And now you're just trusting but verifying.

28:24 [Nick Decker]: Yes.

28:25 [Nick Decker]: Right. And, at some point, we're gonna have full adoption and just readily accept it. I always hear people talk about this concern of, well, that on-the-job training goes out the window. Now, how do you take somebody outta school and say, you're now a PE.

28:40 [Nick Decker]: Yeah.

28:41 [Nick Decker]: You're just, you're the PM now? Yeah. On the engagement, where do you see that going, and any thoughts on how that evolves?

28:49 [Nick Decker]: So yes, I think there's, a couple different dimensions here. One is you need to make your Principles much more scalable. Their leverage needs to go up by an order of magnitude, and that can be done through technology. It used to be that they had to sit in the office side by side. With every single new engineer, coach them through months of here's how we write a letter, here's the voice of our emails. All of that can go away through technology and capture how they, as principals, have run their projects in the past, and scale that down to the new employees.

From the new employee standpoint, to be totally frank, this next generation is tech native. They won't do the old school sit next to me and show me how you stamp an email and hand ink your name, and so on and so forth that I had to go through. Unfortunately, that new generation isn't going to sit for it, and they're gonna go work somewhere else that doesn't make them go through that process.

But at the same time, in order to get them that intelligence, that knowledge, there are a ton of learning tools that are free and available to allow them to explore and get up to speed much, much faster. Things like NotebookLM have been incredible, where they can dump in a whole corpus of information "Hey, here's how we operate as a firm. Here's our standard operating procedures." And then it'll output podcasts. It'll send them through quizzes. It will do all of this knowledge transfer and allow them to learn in the format that they're comfortable in. And then they can come back and ask questions. It's not just, Hey, here's the process.

They can come back and ask intelligent questions of the Principal. And that's where the Principal can be much more high-leverage and scalable for the junior engineers and the junior PMs. And so I think that is a totally different model that the industry is not ready for or rather, they have to rethink that onboarding process and that holds true again for acquired firms, new employees, straight out of school, people that are transferring industries as well. These people are incredibly smart. You just have to give them the tools in order to get up to speed much, much faster.

31:03 [Jeff Adams]: Well, you know, we're seeing buyers increasingly acquire capability rather than just backlog or geography. What are your thoughts on that around acquisitions of AI technology?

31:14 [Nick Decker]: Yeah, I think, in particular, there's some early data that suggests that this is the next frontier. Multiples are going up for tech-ready firms, and what that means is, firms that are fully cloud native, in some cases, they have software development resources already on staff as a sell-side firm.

31:36 [Jeff Adams]: Mm-hmm.

31:36 [Nick Decker]: You would not have heard that two or three years ago, but now that's an amplifier for their multiple, they can prove to the acquiring firm. We are now scalable you are biting off a small acquisition that maybe it's 25 people, maybe it's 200 people, but they are now scalable. Their leverage is outsized because they have tech adopted. And so from a valuation standpoint, from a sell-side perspective, that should be the best investment you could ever make. If you're preparing for a sale, go get your tech house in order.

As far as, the buy-side standpoint, we've seen industry leaders, so, you know, AECOM made a buzzy acquisition, a few months back of Consigli, who's this, tech-forward CM and automation tool. And it's cool. I think what they're doing is, they being Consigli, is interesting, but why this is so telling for the industry is that this is a perfect proof point of a tech-first company that is infinitely scalable. And AECOM saw the writing on the wall, and they're worried that they're gonna get disrupted.

And so when the top players in the market are paying that level of premium for a tech company, everyone else should be taking notice as well. The old days of just acquiring headcount for headcount and paying the standard five x multiple or whatever it is that comes through the door isn't gonna fly two, three years from now. And so get on board now and start being a little bit more discerning about the segment or the market tech forward as well.

What I will also say, as it pertains to acquiring capabilities, I heard a quote from one of our CIOs who is very, very discerning about what they do in the acquisition process, and their North star was we cannot be a constellation of offices. We have to be one office. And what that means is you have to have a firm that can, provide a cohesive solution to their clients. It's not just, "Hey, this office does this particular service, and these people do this particular service, and never the two shall twain. That you now have to be a solution provider and not just a services company that has charges by the hour. That component of capability scaling is really interesting, particularly when it's tied to the technology side.

34:01 [Jeff Adams]: You mentioned the AECOM example a while ago. You know, we're actually seeing the reverse, too, where AI technology-focused companies are acquiring engineering firms, right? Saying rather than trying to get the engineering industry to adopt what they're selling and convince them that they should buy, it's more of we'll just take what we're already doing and know where the future's taking us, and we're just gonna make it happen inside your firm. So.

34:27 [Nick Decker]: Spot on. It'll be interesting. Tech companies are often seen as the minnow getting gobbled up by the sharks that are the AECOMs of the world. That story could very well flip in the next year or two, where the tech companies are even more gobbling up these the service firms themselves.

There's also this role that has become much more prevalent in the industry called a forward deployed engineer, that I think is a canary in the coal mine for the industry, where it is someone who basically sits in a professional services office. They'll sit next to your engineers, your architects, your project managers, and they will essentially learn your process and how you do work. And in the back of their head, they're sitting there reconstructing how to generalize this process across the firm. They're looking for scalability options and discovering the way in which you deliver work. And then they will take that back to a tech team and say, "Let's go automate this."

That forward-deployed engineer is incredibly valuable. You know, I talk about leverage and scalability, this is one of those roles that the forward-looking firms are already employed. If you don't have an FDE yet forward deployed engineer, you might in a year or two, because these are the people that are looking for those opportunities to scale and will be able to tactically apply AI, not just in general, but to your business process and map it exactly to how you do steps and how you deliver value. And that's gonna be really interesting to see over the next year or two.

35:57 [Jeff Adams]: Yes, it will. So as we wrap up here, Nick, let's talk about some of the practical takeaways here for firm leaders. If a firm plans to sell in the next few years, what technology steps should they start right now?

36:11 [Nick Decker]: Yeah, first and foremost get from on-prem into the cloud. The value of being on-prem nowadays is not what it was, pre-fiber internet. You may be concerned about people having fast access to laser scans or large BIM models. To be totally frank, getting to the cloud is a non-negotiable at this point.

36:33 [Jeff Adams]: Mm-hmm.

36:34 [Nick Decker]: And there's really no reason to hold back and not invest in that space. It's affordable. It's doable. It's a well treaded path. It will be a foundation for everything else. All of the security, AI tooling, and collaboration across offices, all of that requires some level of movement to the cloud that will pay immense dividends downstream, particularly on the sell-side.

In addition to that, there needs to be some level of experimentation in the firm,creating some culture of experimentation, with new technologies going to identify within the firm, the people who like to tinker, which oftentimes engineers love to tinker. Go find those people that are hand raises and say, here's some budget. Go try out some new, some new tech. Show us what you got. People will do this nights and weekends because they love it. It's exciting for them. Allow them to push the boundaries a little bit, and create those feedback loops, and instill some culture that can then be scalable. Those two things are, tactical pieces of this are, again, move to the cloud and experiment. Because if you're not experimenting today, you're in trouble.

37:47 [Jeff Adams]: Yeah. Really gonna get left behind. Right.

37:50 [Nick Decker]: Exactly.

37:52 [Jeff Adams]: So, what technology questions should sellers ask potential buyers?

37:57 [Nick Decker]: Yeah. I think, as a seller. I am concerned enough about my employees and how disruptive the HR side of this acquisition will be, people concerned enough about, their job and so on and so forth. And you can't really change or quell that, concern. What you can do is have a conversation about how disruptive their day-to-day work is in today's world.

The day-to-day delivery is often 38:25 [Nick Decker]: done through the lens and the work surface of technology. It's BIM, it's CAD, it's collaboration through Teams. It's all of that other stuff. And so understanding that component as a sell-side firm needs to be well understood because that disruption coupled with the acquisition disruption, could be really painful and cause some churn for the folks on staff. So I think that question alone, being able to really understand how disruptive the new technology at this new firm going to be to my employees is something that is not asked nearly enough.

I've seen a number of acquisitions where the buy-side firm, the acquiring firm, has essentially rolled back all of the tech adoption and ways in which employees could work from home. They could pull, information up from their phone, and they have to go back through on-prem and VPNs and stuff like that. Employees were like, no, I'm not going back a decade. Like, I'm sorry. I have a way; my work-life balance is much better because I have the technology. I have the ability to work from home one day a week. I can reply to an answer because I have all the files and folders and things on my phone. If I'm out to dinner and I can do that stuff. I don't have to be in the office replying to that stuff. That's where the rubber meets the road and can cause a lot of concern for a sell-side firm.

39:45 [Jeff Adams]: All right. I'm gonna ask you a question now, Nick. The last question is the one that the firm leaders need to get their pencils and pens out for.

39:52 [Nick Decker]: Mm-hmm.

39:52 [Jeff Adams]: Uh, to take some notes here and that's looking ahead five years, what will separate the most valuable AEC firms from the rest?

40:01 [Nick Decker]: Yeah, it's the ones that have viewed technology as a scalability lever. If you're only looking at your scalability and your efficiency through the lens of headcount. That's the total wrong approach here. It's efficiency will inherently amplify over the next five years, and if tech isn't a key component of that strategy you're already lost. Headcount is not going to be enough in this next generation. I think the other piece here is, think at it through the lens of your clients.

40:39 [Jeff Adams]: Uh mm-hmm.

40:40 [Nick Decker]: You know, ones that are gonna be successful are not solving these problems and selecting technologies for themselves, in a bubble. It needs to be through the lens of why this is valuable to the clients, because that's where the value of the firm lies. Again, repeat business for your client. So I think that is something that people are still trying to figure out, how to make your client happy. But at the same time, capture value from being more efficient. I don't have a silver bullet there on how to capture more value but also be more efficient. Clients are asking for these things and it needs to be considered, certainly in next strategic cycle.

41:21 [Jeff Adams]: Well, before we wrap up here, Nick, give your elevators, pitch here. Tell us why firms should contact Egnyte.

41:29 [Nick Decker]: Yeah, Egnyte is the foundational layer for everything else that we talked about around a cutting-edge, A&E or AEC firm through migration to the cloud. Better collaboration across offices, a more secure environment to take on sensitive projects and government projects. The next iteration of this, and where our clients are pushing us, is the adoption of AI and searchability. So unlocking that intellectual property, making your clients more efficient, and AI is going to be a key cornerstone for the future of Egnyte. And, specific to this, AEC industry.

42:10 [Jeff Adams]: Well, Nick, this has been very educational for me, and I'm sure it has been for our listeners as well. I appreciate you joining us today.

42:17 [Nick Decker]: Thank you, Jeff. it was a great chat for me. Thank you.

42:25 [Jeff Adams]: Thank you for tuning in to AEC unscripted the Mergers and Acquisitions edition. I'm Jeff Adams, and it's been a pleasure guiding you through M&A through the lens of a data and information expert. Please remember to subscribe and leave us a review wherever you get your podcast. And until next time, keep pushing forward.