Morningstar | Jacobs Announces Acquisition of National Security Solutions Provider KeyW; Maintaining FVE
Jacobs Engineering announced the acquisition of national security solutions provider KeyW for roughly $815 million. KeyW operates three business lines: intelligence, surveillance and reconnaissance products & solutions; advanced cyber operations solutions; and mission IT and analytics. Jacobs' management expects the acquisition to deliver $15 million in annual run-rate cost synergies by the end of 2020, generate over $100 million in potential revenue synergies, and be accretive to revenue and operating margin growth.The deal, expected to close by Aug. 31, marks another step in CEO Steven Demetriou’s effort to enhance Jacobs’ government services capabilities. At the recent Investor Day, management said it would pursue strategic M&A opportunities to expand its aerospace, technology & nuclear segment’s portfolio, particularly focusing on growing its cyber engineering business and expanding into complementary high-margin niche sectors. The KeyW deal is consistent with those priorities, and we think it will bolster Jacobs’ government services business. We maintain our no-moat rating and do not expect a major adjustment to our fair value estimate.
Jacobs Engineering Group provides services including consulting, technical, scientific and project delivery for the government and private sector. The company's lines of business are: Critical Mission Solutions, which provides cybersecurity, data analytics, software application development, enterprise and mission information technology, systems integration and other technical consulting solutions to government agencies as well as aerospace, automotive and telecom customers; and People and Places Solutions, which provides end-to-end solutions for its clients' projects, whether connected mobility, water, smart cities, manufacturing or the environment.
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