Our Journey with Endurance Engineering Partners and the Westwood Professional Services Acquisition
- Chase Begor
- Dec 31, 2021
- 3 min read
Updated: May 27
At Lunchline Partners, our core mission is to actively partner with and transform businesses in the lower middle market (LMM) through "The Lunchline Way" – a disciplined, hands-on approach focused on strategic "Build-Ups," operational excellence, and the potent combination of Systems and Culture. While our primary focus is on active, control-oriented investments where we can roll up our sleeves and implement this playbook, we remain lifelong learners, always seeking to expand our "library cards" of experience.
It was in this spirit that we made a passive investment alongside Endurance Engineering Partners (EEP) in their acquisition of Westwood Professional Services (WPS), a national multi-disciplined surveying and engineering firm. While not an active Lunchline-led endeavor, this participation provided a valuable vantage point to observe an opportunity that resonated deeply with many of the core tenets of our own investment philosophy and highlighted the compelling attributes of the engineering services sector, particularly its exposure to the energy transition.
The Engineering Services Landscape: A Reflection of LMM Opportunity
"The Lunchline Way" thrives on identifying industries with specific characteristics ripe for transformation. Our passive observation of the WPS opportunity underscored several of these:
Industry Fragmentation & Build-Up Potential: The U.S. engineering services industry is notably fragmented, with tens of thousands of small enterprises and the top five largest companies accounting for only about 10% of industry revenue in 2019. This is precisely the type of landscape where our "Build-Up" strategy – distinct from conventional "Roll-Ups" – is designed to create market-leading platforms. WPS itself had a strong track record, having successfully acquired and integrated 12 businesses since 2013, and EEP’s thesis projected significant further tuck-in acquisitions at attractive multiples. This validated our belief in the power of strategic consolidation to "buy down" investment multiples and achieve scale.
Essential Services with Secular Tailwinds: Westwood serves critical end markets like renewable energy, power transmission, and public/private land development. These sectors are buoyed by long-term growth drivers, including carbon emission imperatives, grid hardening initiatives, ESG investment inflows, and demographic shifts. The global energy transition alone is estimated to require trillions in annual investment. This aligns with our focus on industries providing essential services with non-discretionary demand and strong growth profiles. Endurance themselves noted the renewable exposure as "primed for accelerated growth".
Untapped Value and Operational Enhancement: Many LMM companies, even successful ones, possess significant untapped value that can be unlocked through operational and technological enhancements. In the case of WPS, while a strong performer, Endurance Partners identified opportunities for EBITDA margin expansion through investments in operational infrastructure and process improvements, particularly in revamping and standardizing M&A processes. This echoes our own Lunchline Engine's focus on systematic playbook implementation and driving efficiencies.
Human Capital as a Critical Asset: Engineering services are inherently people-intensive. Attracting, retaining, and managing talent is a principal factor for success. This resonates deeply with our view of "Human Capital as Alpha" and our strategic comfort with people-intensive businesses, leveraging frameworks like the WIN Methodology to align employee success with business objectives.
Attractive Entry Dynamics: The LMM often allows for acquisitions at compelling valuations. Endurance noted that the transaction valued WPS at a significant discount to precedent transactions, achieved by building a direct relationship with the management team outside of a broad auction process.
Passive Participation, Active Learning
Our investment alongside EEP in the Westwood opportunity was intentionally passive, a means to gain further exposure to an attractive industry and observe a skilled team execute a compelling investment thesis. Endurance Engineering Partners spent two years studying the space before this opportunity arose, and their enthusiasm was palpable.
Observing the dynamics of this investment – from the fundless sponsor model Endurance was employing, their efforts to curate a "best of breed investor group" with relevant ESG or renewable energy experience, to the strong management equity rollover – provided valuable insights. It reaffirmed our conviction in "The Lunchline Way": that a disciplined, operationally-focused approach, combined with strategic build-ups and a deep understanding of human capital, can unlock tremendous value in the lower middle market.
While we continue to focus on our active strategy of building great businesses and driving innovation through direct operational engagement, experiences like these enrich our perspective and reinforce our commitment to learning, growing, and developing. It’s about staying intellectually curious and always striving to "get it right" – a philosophy that underpins every decision we make at Lunchline Partners. This particular observation was a strong validation of the principles we champion and the types of opportunities we seek to cultivate directly.