Leidos (LDOS) M&A announcement summary

Deal rationale and strategic fit

• Acquisition aligns with the North Star 2030 strategy, advancing digital, mission, and energy infrastructure leadership while expanding into power generation, gas, and electric infrastructure.

• Doubles the size of the energy infrastructure engineering business, expanding capabilities and customer base.

• Cultural alignment and similar business models and compensation structures enable rapid integration and talent retention.

• Supports national priorities for energy infrastructure resilience, security, and modernization, addressing growing demand and aging infrastructure.

• Positions the combined entity as a top-three provider of transmission and distribution engineering services in the U.S., enhancing scale in a fragmented market.

Financial terms and conditions

• All-cash purchase price of approximately $2.4 billion, representing a multiple of around 16x ENTRUST's next 12 months EBITDA, net of tax asset value.

• Funded with $1.4 billion in bonds/new debt, $500 million in cash on hand, and $500 million in commercial paper; $1.4 billion bridge facility committed.

• ENTRUST brings about $650 million in annual revenues at attractive margins, with clear visibility to double-digit revenue growth.

• Expected pro forma leverage of 2.6x gross debt to trailing 12 months EBITDA at close, within target range.

• Transaction expected to be immediately accretive to revenue growth and EBITDA margin, and accretive to non-GAAP diluted EPS by 2027.

Synergies and expected cost savings

• Significant revenue and cost synergies anticipated, with technology integration (including AI tools like Skywire) expected to deliver up to 30% efficiency savings.

• Clear visibility into run-rate cost synergies and increased scale expected to drive innovation and organic growth.

• Cross-selling opportunities in IT and cybersecurity services to ENTRUST customers.

• Combined entity will have over 5,500 energy professionals, enhancing resources for complex utility and power market challenges.

• Tens of millions of dollars in synergies expected to be realized on the bottom line.