AECOM finds buyers for government services company

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AECOM is going in a different direction regarding what to do with its management services business that the company planned to separate into a stand-alone government services company, one way or another.

Los Angeles-based AECOM said on Monday it would sell the company to a pair of private equity firms Lindsay Goldberg and American Securities for around $ 2.4 billion in a deal all parties are anticipating. to conclude in the first quarter of next calendar year.

AECOM Management Services, headquartered in Germantown, Md., Employs approximately 25,000 people – including 10,000 with security clearances – who provide services to U.S. and allied government agencies in areas such as IT, engineering, systems, consulting, training, logistics, program management, facilities management and environmental management.

Management Services recorded $ 3.7 billion in revenue and $ 200 million in operating income in its most recent fiscal year, with nearly 75 percent of those sales coming from the defense and defense departments. energy. Segment President John Vollmer and the existing management team will lead the business under its new owner.

“American Securities and Lindsay Goldberg have an impressive track record of creating sustainable value for their portfolio companies, particularly in the government services industry,” Vollmer said in a statement. “I have no doubts that this group of world-class investors have the resources and expertise that will enable us to accelerate our innovation and future growth. “

“We look forward to working alongside management and American Securities to thoughtfully develop the company and its capabilities both organically and through strategic transactions,” added Russell Triedman, partner of Lindsay Goldberg , in the same press release.

Lindsay Goldberg is an experienced investor in the government market, as he previously owned PAE between 2011 and 2016 and had a partial stake in ECS Federal from 2015 to 2018. American Securities is a newcomer to services government.

The announcement of the transaction comes nearly four months after AECOM announced it would continue to split its management services business into a new publicly traded government services company.

This June disclosure also marked the start of a two-way process in which the company went through the IPO process and communicated with potential buyers at the same time: an auction that the CEO of AECOM, Michael Burke, detailed during a call with investors Monday morning.

“When we announced the spin, we immediately had an inbound interest. We had two banks involved not only to capture that inbound interest, but also to solicit outbound interest from all the right strategic buyers, as well as the right buyers. financials, “Burke told analysts.” It got us through a process over the last four months, which was a highly competitive process that had different stages and different gates.

“We ended up in the last three or four weeks with three buyers bidding competitively… we had the right competitive tension until last Thursday night before we came to a final deal with one of the parties,” Burke added. “It has been a very robust competitive process with both strategic buyers and financial buyers. “

Fluor Corp. follows a similar process in finding a buyer for its $ 3.8 billion revenue government services company, as this company is also looking to reshape itself to achieve a better financial profile, just as AECOM is doing in part through to its own divestiture aimed at helping clean up the balance sheet and unlock more shareholder value.

At a price of $ 2.4 billion, the sale of government services of AECOM achieved a valuation of 11.6 times earnings before interest, taxes, depreciation and amortization compared to AECOM’s overall valuation of approximately 8 times the EBITDA.

AECOM placed 15th in this year’s edition of Washington’s Top 100 Technology 2019 ranking based on major contracts in IT, professional services, telecommunications and other areas related to technology.

The transaction does not mark a complete exit for AECOM from the government market. Burke said AECOM would keep about $ 1 billion in annual federal government revenue, mostly hosted in the company’s design and consulting services segment, but also including construction contracts with agencies.

Goldman Sachs & Co. LLC and DBO Partners LLC are acting as financial advisers to AECOM, Wachtell, Lipton, Rosen & Katz acting as legal advisers.

RBC Capital Markets LLC and JP Morgan Securities LLC are financial advisers to Lindsay Goldberg and American Securities. Cravath, Swaine & Moore LLP is legal counsel to private equity firms.

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