Thornton Tomasetti Merger: Press Release from Wall Street Journal

By Derek Newberry, Advocacy Fellow

Below is a re-post of a press release in the Wall Street Journal from our Chapter sponsor, Thornton Tomasetti. Congratulations on this major corporate advancement, and thank you for your continued commitment to sustainability and green buildings!

Engineering Firms Merge, Aim to Drive Innovation

Thornton Tomasetti and Weidlinger Associates, both based in Manhattan, are combining

[From left, Raymond Daddazio, co-president of Thornton Tomasetti after the merger; Robert DeScenza, co-president; and Thomas Scarangello, chairman and chief executive.]
PHOTO: ADRIENNE GRUNWALD FOR THE WALL STREET JOURNAL

By KEIKO MORRIS
Sept. 7, 2015 9:04 p.m. ET

Thornton Tomasetti Inc. and Weidlinger Associates Inc. have been friendly for years, their leaders working together on projects and industry organizations. The relationship didn’t get serious, though, until talk turned to innovation.

Now, the engineering firms are tying the knot.

“There was a lot of respect and there were similarities, but I think it took this idea of driving innovation,” said Thomas Scarangello, chairman and chief executive of Thornton Tomasetti. “The big 20-year goal is to be the driver of innovation globally in our industry.”

The Manhattan-based companies, known for their work on buildings, stadiums and public infrastructure projects, are coming together under the Thornton Tomasetti name.

The merger, expected to be completed through an exchange of stock on Tuesday, creates a privately held company with a broader range of expertise and services, and a wider geographical reach.

The combined entity hopes to influence innovation in the industry. The firm plans to create a research-and-development holding company that will support and potentially market innovations in the construction industry and elsewhere, and bring in outside investors, officials said.

Thornton Tomasetti and Weidlinger have complementary practices and rarely competed with each other, except for talent, company leaders said.

The firms’ combined revenue is projected to be about $240 million in 2015, with about $180 million from Thornton Tomasetti and $60 million from Weidlinger, company officials said.

The new company will have about 1,200 employees and offices in 34 cities. Thornton Tomasetti has about 950 employees and offices in 27 cities, and Weidlinger has 260 employees in 10 cities. The firms both have offices in New York City, Washington, and Boston.

The construction industry, compared with other sectors, has been a slow adopter of innovations, partly because of the way projects are often managed with several companies handling various parts of the building process, industry experts say. By contrast, a manufacturing firm, for example, owns and controls its plant and its labor, a structure that makes it easier to incorporate innovations, said Greg Gerstenhaber,partner in the Dallas office of Bain & Co., a management consulting firm.

But there has been a big push in using digital technology to do design work more efficiently with such tools as advanced modeling software and 3-D printing, Mr. Gerstenhaber said.

“These tools are powerful and driving a lot of innovation,” he said. “But this is an industry that’s tougher to drive innovation,” and a “high level of coordination” is often required to put new concepts into practice, he said.

Individually, both firms encouraged employees to develop ideas and, in some cases, formed niche businesses around these developments, company leaders said.

Thornton Tomasetti is working with NASA to create more cost-efficient tuned mass dampers from technology that had been developed to control vibrations on vehicles launched into space. Tuned mass dampers are devices typically employed in many skyscrapers built today to reduce movement and vibrations.

One Weidlinger software product enabling virtual prototyping has had uses outside of the firm’s main focus area. One application of it has allowed the medical ultrasound industry to drastically reduce the time it takes to bring improved equipment to market, saidRaymond Daddazio, formerly Weidlinger’s chief executive who will now serve as co-president. That software emerged out of other applications designed to simulate and analyze seismic waves and shock waves.

A dedicated research-and-development holding company can pave the way for more of these developments that eventually generate revenue to support similar projects, company heads said.

“The people who do that work in our firm aren’t on the traditional path of becoming a principal in a structural engineering firm,” Mr. Daddazio said. “So we have been trying to explore ways to continue that type of innovation and have a structure to motivate those people as well.”

One of the goals behind the union is similar to those driving mergers and acquisitions in the construction and engineering industry world-wide. The merged company can offer a number of integrated services on a project; it now has 10 practice areas.

“Instead of working as two independent firms and sharing data through an intermediary, we have people working hand in hand in the same office working on the same design,” said Robert DeScenza, president of Thornton Tomasetti, who becomes co-president of the combined companies.

And the merger can boost the company’s competitive edge in a global marketplace, where engineering and construction industry mergers are on the rise. In the second quarter of this year, acquisition and merger activity “accelerated sharply” from the first quarter with the number of both mergers and acquisitions of $50 million and more increasing to 64, a 73% jump, according to a report from PricewaterhouseCoopers LLP.

But leaders at the newly merged Thornton Tomasetti said they aren’t interested in growing purely to boost the number of projects it handles and will continue to be selective about the jobs it takes.

“We don’t do assembly-line engineering,” said Mr. Daddazio.

Both firms had resumes filled with high-profile, complex projects. Thornton Tomasetti has provided structural engineering and design services for some of the tallest skyscrapers in the world, including the Shanghai Tower in China, which is 2,074 feet high, and the planned Kingdom Tower in Jeddah, Saudi Arabia, which will rise more than 3,280 feet.

Weidlinger, the smaller of the two, is known for its transportation and protective design work. The firm provided structural-design and blast-engineering services for the U.S. Embassy in Berlin and designed the San-Francisco-Oakland Bay Bridge, a self-anchored suspension bridge that replaced the one damaged in the 1989 Loma Prieta earthquake.

Weidlinger’s applied science, protective design and transportation practices, which have garnered industry recognition, will continue to carry the Weidlinger brand.

“For us, bringing those practices to the Thornton Tomasetti platform gives us so much wider reach, more opportunity,” Mr. Daddazio said. “…Engineers get good based on the projects they have worked on. This is just a bigger platform for growth for our people.”