The prospective deal would be CTI’s first acquisition outside of Japan, while the firm will retain Waterman’s senior management, London headquarters, company name and business model as part of the deal.
The two firms have agreed a 140p-per-share cash offer, which represents an 85 per cent premium on Waterman’s share price.
The deal will now to go shareholders for approval.
CTI is one of Japan’s largest engineering consultancies, with a turnover of around £300m, while the firm employs more than 2,000 staff.
Following the acquisition of Waterman Group, the firm will have a presence across the UK, Ireland, Asia and Australia.
CTI already has offices in Pakistan, Cambodia, Indonesia, China, and Mongolia, but does not currently undertake any business in Europe, with works outside of Japan currently accounting for 8 per cent of its total order book in the last three years.
In its most recent results for the six months to 31 December 2016, Waterman posted a revenue of £45.7m and a pre-tax profit of £1.8m.
CTI president and representative director Kazuo Murata said: “Our investment in Waterman is a clear sign of our belief in the UK as a place to do business and its strategic importance in serving international markets.
“We are also excited about the possibility to build upon Waterman’s foothold in the Australian market and, through its office in Ireland, within Europe.
“We intend to support Waterman’s management team so that they can operate Waterman collaboratively within CTI’s group of companies.”
Waterman chairman Michael Baker added: “The Waterman Board believes that the CTI proposal provides considerable opportunities for our people and enhances our capabilities and expertise in several key markets, including highways and flood defence.
“In particular, the proposal for Waterman to continue to operate as an independent business within the CTI Group is compelling for both our clients and our people.”
Shares in Waterman Group were up 82 per cent in mid-morning trading in London today.