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Cognizant acquires Belcan

Digital engineering and data specialist Cognizant, has signed a definitive agreement to acquire Belcan, LLC, supplier of Engineering Research & Development (ER&D) services, for approximately $1.3 billion in cash and stock, subject to customary adjustments.

Image copyright sdecoret  / Shutterstock

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, defence, space, marine and industrial verticals, primarily in North America and the United Kingdom (UK).

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The acquisition will significantly expand Cognizant’s ER&D capabilities, building upon the company’s position in the Internet of Things (IoT) and Digital Engineering practice areas. Combining with Belcan (a portfolio company of AE Industrial Partners) will also add scale and enable Cognizant to establish a leadership position in the high-growth aerospace & defence (A&D) sector with a blue-chip client base, deep domain expertise and significant technological capabilities with over 6,500 engineers and technical consultants.

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 annualised basis. Revenue from the acquired business has grown at an 8% compound annual growth rate (CAGR) over the last two years.

“We believe that acquiring Belcan will strengthen Cognizant’s position in the sizable and fast-growing ER&D services market,” said Cognizant CEO Ravi Kumar S. “Belcan’s deep engineering capabilities and domain expertise across the aerospace & defense market will be complemented by Cognizant’s scale and own multi-decade digital engineering expertise, providing Belcan’s blue-chip client roster access to our advanced AI, Cloud and Data technologies.”

Kumar continued, “We see the opportunity to immediately accelerate revenue growth and create compelling shareholder value through our combined engineering capabilities. Belcan’s clients would gain access to Cognizant’s full suite of technology services, while Cognizant’s clients across the manufacturing, automotive, energy, and high-tech sectors we believe will benefit from Belcan’s engineering skills.”

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 fast-growing 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 highly talented and strong US/UK based workforce of Belcan with the talent pool from Cognizant’s global delivery network to support global programmes in the Belcan client base
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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. Cognizant will also establish a dedicated integration programme office to drive execution against strategic and financial goals for the transaction.

“We are excited about this unique combination and the value creation it will bring to our customers, along with the opportunities it will provide for our employees. Cognizant will better position our team to capitalise on compelling tailwinds, including increasing outsourced ER&D spend, the transformative impact of digital engineering adoption rates, robust commercial aerospace demand, and favourable long-term defence and space spending,” said Mr. Kwasniewski. “Belcan’s experienced team has built a growth-oriented business delivering highly complex, mission-critical, scalable services to our long-standing customer base. I look forward to continuing to lead our team as we unite and leverage Belcan’s and Cognizant’s comprehensive services and cross-industry clientele to execute on our collective strategy, ultimately earning the role of our clients’ most trusted partner in intelligent engineering.”

The transaction is anticipated to close in the quarter ending 30th September 2024, subject to the receipt of required regulatory approvals and other closing conditions. The total purchase price of approximately $1.29 billion, subject to customary adjustments, comprises $1.19 billion in cash consideration and a fixed 1.47 million Cognizant shares, with a current value of $97 million based on Cognizant’s closing share price on Friday 7th June 2024. The cash consideration is expected to be funded through a mix of cash on hand and debt.

Cognizant, which helps modernise businesses through the introduction of digital engineering technologies and transformation of processes, intends to increase its share repurchase plan to maintain current share count guidance of 497 million for the full year 2024. Perella Weinberg Partners served as financial advisor and Arnold & Porter served as legal advisor to Cognizant. Jefferies and Solomon Partners acted as financial advisors and Kirkland & Ellis served as legal advisor to Belcan.

Founded in 1958, Belcan is a global supplier of design, software, manufacturing, supply chain, information technology and digital engineering services to the aerospace, defence, space, marine, government services, automotive and industrial markets. Belcan provides engineering solutions, from jet engines, airframe and avionics, to heavy vehicles, automobiles and cybersecurity.

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