Jacobs to Acquire Majority Stake in PA Consulting
- Jacobs and PA Consulting form strategic partnership to capture next wave of digital revolution
- Joint client-focused growth teams drive revenue synergies in key sectors
- Builds significant business through innovation, technical, digital and consulting solutions
- Expect fiscal year 2022 adjusted EPS accretion of >$0.52
Jacobs and PA Consulting, a leading innovation and transformation consulting firm, announced that they will form a strategic partnership in which Jacobs will acquire a 65% stake in PA. The investment places an enterprise value of PA at £1.825 billion ($2.4 billion). The remaining 35% stake will be held by PA employees, following the exit of existing majority stakeholder, The Carlyle Group.
“We are on the cusp of the next digital revolution as advances across 5G-driven compute power, robotics, autonomous technology, machine learning automation and geospatial technology converge to provide solutions to many of the world’s most complex challenges, including disruption to traditional business models,” said Jacobs Chair and CEO Steve Demetriou. “Our partnership with PA forms a unique offering in the market that combines strategic front-end consulting and deep domain knowledge across key sectors with next generation science and technology expertise.
Over the last several years we have transformed Jacobs to a leading technology enabled solutions provider built on a foundation of strong core values with an inclusive and diverse culture. This strategic partnership is an intentional move in accelerating our strategy to lead the market as a company like no other.”
PA has delivered strong growth over the last five years, resulting in EBITDA more than doubling over the period and achieving compound annual revenue growth of 12% since 2016.
From its inception in 1943, PA has worked with a wide range of clients – from start-ups with a promising idea to change the world to some of the most important global companies and organizations – to find innovative ways to be faster and nimbler, and to create the services and products that grow their businesses, delight their customers and the global community. PA has developed world-leading innovations with Virgin Hyperloop to reinvent transport, with Ori Biotech to revolutionize cell and gene therapy manufacturing and with public utilities leveraging iPredict™, the world’s first AI and Machine Learning system to predict failures in critical underground electricity distribution assets.
Partnership Between Jacobs and PA Accelerates Shift to Global Leader in High Value Solutions
- Sets a new industry benchmark in differentiated solutions that deliver end-to-end value for Jacobs and PA clients, employees and investors – changing the shape of the industry.
- Transforms PA to a global player at scale; accelerating their growth plan through access to Jacobs client base and global platform, particularly in the U.S.
- Advances opportunities for both Jacobs and PA employees through collaboration and co-creation of innovative solutions.
- Provides timely positioning of ingenious solutions-based platforms for enhanced agility in response to current-day challenges such as climate change, decarbonization, urbanization and the ongoing healthcare crisis.
- Targets joint go-to-market teams toward initial high growth sectors of Health and Life Sciences, Public Services, Consumer and Manufacturing, and Defense and Security to capitalize on immediate revenue synergy opportunities.
CEO of PA Consulting Ken Toombs said, ”We see Jacobs as the ideal partner for PA, leveraging their client relationship networks and global platform to position us for the next phase of growth. Their purpose to create a connected sustainable world and commitment to an inclusive future for all aligns with our own purpose – Bringing Ingenuity to Life – and our commitment to innovate towards a positive human future. We look forward to continuing to deliver ingenious solutions for our clients, supported by Jacobs’ investment and our partnership.”
Demetriou continued, “The partnership respects and preserves PA’s heritage and independence under Ken Toombs’ leadership – while creating superior value for Jacobs shareholders and significant opportunities for our clients and employees.”
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Transaction Terms and Financing
The transaction is structured as a private equity style investment, with Jacobs acquiring a 65% stake in the form of preferred and common equity, with PA employee rollover constituting the remaining 35% ownership stake at closing. Preferred equity holders receive a 12% compounded annual coupon accrual. A sweet equity incentive pool of 25% of the common equity is available for issuance to current and future partners and employees of PA. The sweet equity pool will be funded after satisfying the coupon on the preferred equity. In addition, Jacobs will provide debt financing to PA in the form of a £650 million ($845 million) term loan and a revolving credit facility of up to £100 million ($130 million) to fund future growth. Jacobs intends to fund the acquisition through a combination of cash-on-hand and existing and incremental debt facilities.
The transaction, will be implemented by way of a U.K. Scheme of Arrangement and is subject to the satisfaction of customary closing conditions, including the approval of the current shareholders of PA and the U.K. Court (pursuant to the Scheme), as well as the U.K. Financial Conduct Authority.
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