Thoughts on the Astorino/Cannon Merger

This morning’s Post-Gazette story on CannonDesign’s acquisition of Astorino followed a few days of rumors of the deal and has of course spawned its share of speculation about the deal. Given Cannon’s reach and the fact that the firm has regularly – if not frequently – worked in the Pittsburgh market, it seems like Cannon could gain market share without buying Astorino. If you look at Cannon’s announcement of the deal, however, you get some insight about the motive.

I haven’t spoken to Lou Astorino yet and Cannon’s CEO Gary Miller is out of the office, so what follows is speculation. Cannon positions the acquisition as the merger of two like-minded firms serving similar clients. They point out that the two firms have worked together before and share similar philosophies. Once you get into the meat of the news you see that Cannon makes a point of touting the additional capabilities that Astorino Development’s design/build team brings. This construction management arm, that Lou P. Astorino leads, is the value that the Astorino side brings to the table. Astorino’s resume is impressive (how many companies can boast PNC, the Pirates and the Pope as clients?) but no more so than Cannon’s; and Cannon’s billings are roughly 14 times that of Astorino’s. But Cannon didn’t have that construction resume.

Delivery methods are evolving. It was Lou Astorino’s recognition of this fact that led to the launching of the construction management group. I believe it’s more than a gesture that Lou P. is going to lead the design/build operation from Pittsburgh. Whether it’s design-led design/build or just the opportunity to act as as CM-at-risk, Cannon now has capabilities to serve clients that are looking at streamlining the process with an alternative delivery method. In particular, healthcare clients – one of Cannon’s major client groups – are looking at ways to deliver expensive construction with less cost and more predictable outcomes. Highmark/AHN has used Astorino that way. Other large CM/design firms are pitching a modular approach to hospital construction. This puts Cannon in the mix with competitors that it couldn’t joust with before.

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