Cognizant (NASDAQ: CTSH) is to acquire Belcan, a Cincinnati, OH-based global supplier of Engineering Research & Development (ER&D) services, at a purchase price of approximately $1.3 billion in cash and stock, subject to customary adjustments.
The acquisition will expand Cognizant’s ER&D capabilities, building upon the company’s leadership in the Internet of Things (IoT) and Digital Engineering practice areas. Combining with Belcan will also add scale and enable Cognizant to establish a leadership position in the high-growth aerospace & defense (A&D) industry with a blue-chip client base, deep domain expertise, and significant technological capabilities with over 6,500 engineers and technical consultants.
Founded in 1958, Belcan is a global supplier of design, software, manufacturing, supply chain, information technology, and digital engineering services to the aerospace, defense, space, marine, government services, automotive, and industrial markets.
A portfolio company of AE Industrial Partners, Belcan has a long-standing customer base across North America and the United Kingdom (UK).
The revenue the acquired business will contribute to Cognizant in 2024 depends on the timing of the close but is expected to be over $800 million on an annualized basis. Revenue from the acquired business has grown at an 8% compound annual growth rate (CAGR) over the last two years.
As a result of this transaction, Cognizant expects to:
- Significantly expand its access to the ~$190 billion ER&D services market, which is expected to grow at an over 10% forward CAGR through 2026, complementing its existing IoT and Digital Engineering practice areas
- Diversify into the A&D, space and marine sectors, with a stable set of blue-chip clients
- Add a highly skilled, technical and accredited workforce and an employer of choice in ER&D services
- Create shareholder value through enhanced growth opportunities and expected EPS accretion in 2026; expected to be broadly neutral to EPS in 2025
- Deliver over $100 million in annual revenue synergies within three years, with additional cost synergies expected over time
- Complement the US/UK based workforce of Belcan with the talent pool from Cognizant’s global delivery network to support global programs in the Belcan client base
Lance Kwasniewski, the CEO of Belcan, is expected to continue to lead Belcan, which will continue to operate under the Belcan name as an operating unit of Cognizant. Led by CEO Ravi Kumar S., Cognizant will also establish a dedicated integration program office to drive execution against strategic and financial goals for the transaction.
FinSMEs
10/05/2024