Cognizant Technology Solutions (CTSH) M&A Announcement summary

Deal rationale and strategic fit

• Expands access to the $190B ER&D services market, expected to grow at over 10% CAGR through 2026.

• Establishes leadership in aerospace and defense, diversifying revenue mix and client base with blue-chip relationships.

• Enhances digital engineering, IoT, embedded software, and model-based systems engineering capabilities, leveraging a combined workforce of over 6,500 engineers.

• Aligns with strategy to lead at the intersection of industry and technology, driving long-term revenue growth and operational transformation.

• Brings a highly skilled workforce, mainly in the U.S. and U.K., with some presence in India, and provides Belcan's clients access to advanced AI, cloud, and data technologies.

Financial terms and conditions

• Acquisition price is approximately $1.29B, with $1.19B in cash and 1.47M shares of Class A Common Stock valued at $97M.

• Cash consideration funded by a mix of cash on hand and debt.

• Cognizant to increase share repurchase plan to maintain 2024 share count guidance.

• Deal expected to close in Q3 2024, subject to regulatory approvals and closing conditions.

• Expected to be accretive to EPS in 2026, broadly neutral in 2025, and dilutive in 2024 due to non-cash amortization and integration costs.

Synergies and expected cost savings

• Over $100M in annual revenue synergies anticipated within three years through cross-selling, scaling global delivery, and expanding ER&D offerings.

• Cost synergies expected from SG&A savings, central function efficiencies, and modernization.