The European engineering market comprises businesses that are engaged in the planning, design, development, advisory and implementation of a wide range of objects and assets. The type of engineering services provided in a given project depends on the characteristics of the asset, such as infrastructure, residential and commercial buildings, energy-related structures or mechanical systems. As such, we have segmented into: (i) generalist, (ii) construction, (iii) infrastructure, (iv) energy & offshore, (v) environmental and (vi) industrial.

The European engineering market is characterised by its fragmented nature. While there are leading generalists such as Groupe Bouygues, STRABAG Group and Skanska as well as large infrastructure players including VINCI, ACS Group and Eiffage, the market is primarily composed of smaller players with a national focus. Due to the fear of a recession and high financing costs resulting in more expansive M&A activity, we do not expect the engineering market as a whole to consolidate much more in the near future. However, in the medium term, the market may show increased consolidation as interest and inflation rates level out as well as the need for players to acquire expertise (e.g. engineering software; CFA Worldwide, November 2023).

Overall investor interest has been limited, with ~30% of identified European assets receiving financial backing (as of February 2024). The main deterrents for investors comprise low profit margins resulting from price pressure induced by tenders to win projects, project-based revenue streams, limited differentiation opportunities and the high cyclicality of the industry. Favourable factors attracting investors include exposure to various end markets, long-lasting client relationships, and the fragmented nature of the market, which offers ample buy-and-build opportunities.

ESG topics primarily relate to environmental and social factors. Herein, players have a direct influence on the environment by implementing sustainable design and construction processes. As such, they increasingly focus on energy-efficient projects that follow modular designs and reduce emissions during operation. Social benefits arise from improved access and safer infrastructure (e.g. roads) as well as worker safety during the construction phase.