Cognizant to acquire ER&D services firm Belcan for $1.3 billion

Technology company Cognizant recently announced that it has signed a definitive agreement to acquire Belcan, LLC for approximately $1.3 billion.

Belcan, a portfolio company of AE Industrial Partners, is a leading global supplier of Engineering Research & Development (ER&D) services.

The purchase price will be paid in cash and stock, subject to customary adjustments. The acquisition will significantly enhance Cognizant's capabilities in the ER&D market, the company said in a release.

Aiming to expand ER&D capabilities

Belcan is an established player in ER&D that provides mission-critical digital engineering services for a long-standing customer base across the commercial aerospace, defense, space, marine and industrial verticals, primarily in North America and the United Kingdom (UK).

By integrating Belcan’s expertise, Cognizant aims to expand its ER&D capabilities and establish a strong foothold in the aerospace and defence (A&D) industry. T

The merger will bring over 6,500 engineers and technical consultants under Cognizant's umbrella, boosting its technological prowess and client base in these high-growth sectors.

Massive revenue contribution

The revenue contribution from Belcan to Cognizant in 2024 is anticipated to be over $800 million annually, depending on the timing of the transaction closure.

Over the past two years, Belcan's revenue has grown at a compound annual growth rate (CAGR) of 8%.

Cognizant expects to see immediate revenue growth and enhanced shareholder value.

The acquisition is projected to deliver over $100 million in annual revenue synergies within three years, with additional cost synergies expected over time. The deal is also expected to be broadly neutral to earnings per share (EPS) in 2025 and accretive in 2026.

Leadership comments

Cognizant’s CEO, Ravi Kumar S., emphasized that the acquisition will solidify Cognizant’s position in the ER&D services market, leveraging Belcan’s deep engineering capabilities and domain expertise.

"Belcan's clients will gain access to Cognizant's advanced AI, Cloud, and Data technologies, while Cognizant's clients will benefit from Belcan's engineering skills," Kumar stated.

Belcan’s CEO, Lance Kwasniewski, expressed excitement about the merger, noting that it will create significant value for customers and opportunities for employees. "Cognizant will better position our team to capitalize on compelling tailwinds, including increasing outsourced ER&D spend and robust aerospace demand," he added.

Acquisition is expected to close by end of September

The acquisition is expected to close by the end of September 2024, pending regulatory approvals and other closing conditions.

The purchase price includes $1.19 billion in cash and 1.47 million Cognizant shares, valued at $97 million based on the closing share price on June 7, 2024.

The cash portion will be funded through a mix of cash on hand and debt.

Cognizant plans to increase its share repurchase plan to maintain a share count of 497 million for the full year 2024. Advisors for the transaction include Perella Weinberg Partners and Arnold & Porter for Cognizant, Jefferies, Solomon Partners, and Kirkland & Ellis for Belcan.