Jacobs is acquiring a 65% stake in PA Consulting and also providing debt financing in the form of a £650 million ($845 million) term loan and a revolving credit facility of up to £100 million ($130 million) to fund future growth.
The investment places an enterprise value of PA at £1.825 billion ($2.4 billion) with the remaining 35% stake held by PA employees, following the exit of existing majority stakeholder, The Carlyle Group.
Rothschild & Co. is serving as exclusive financial advisor and Fried, Frank, Harris, Shriver & Jacobson is serving as legal counsel to Jacobs.
J.P. Morgan and HSBC are serving as financial advisors to The Carlyle Group and PA. Linklaters is serving as legal counsel to The Carlyle Group and PA, and Dickson Minto is serving as legal counsel to the management of PA.
“We are on the cusp of the next digital revolution as advances across 5G-driven compute power, robotics, autonomous technology, machine learning automation and geospatial technology converge to provide solutions to many of the world’s most complex challenges, including disruption to traditional business models,” Steve Demetriou, CEO and chair of Jacobs, said. “Our partnership with PA forms a unique offering in the market that combines strategic front-end consulting and deep domain knowledge across key sectors with next-generation science and technology expertise. Over the last several years we have transformed Jacobs to a leading technology-enabled solutions provider built on a foundation of strong core values with an inclusive and diverse culture. This strategic partnership is an intentional move in accelerating our strategy to lead the market as a company like no other.”
PA’s EBITDA more than doubled over the last five years, achieving compound annual revenue growth of 12% since 2016.
”We see Jacobs as the ideal partner for PA, leveraging their client relationship networks and global platform to position us for the next phase of growth. Their purpose to create a connected sustainable world and commitment to an inclusive future for all aligns with our own purpose — Bringing Ingenuity to Life — and our commitment to innovate towards a positive human future. We look forward to continuing to deliver ingenious solutions for our clients, supported by Jacobs’ investment and our partnership,” Ken Toombs, CEO of PA Consulting, said.
“The partnership respects and preserves PA’s heritage and independence under Ken Toombs’ leadership while creating superior value for Jacobs shareholders and significant opportunities for our clients and employees,” Demetriou said.
The transaction is structured as a private equity style investment, with Jacobs acquiring a 65% stake in the form of preferred and common equity, with PA employee rollover constituting the remaining 35% ownership stake at closing. Preferred equity holders receive a 12% compounded annual coupon accrual. An equity incentive pool of 25% of the common equity is available for issuance to current and future partners and employees of PA. The equity pool will be funded after satisfying the coupon on the preferred equity.
The transaction will be implemented by way of a U.K. Scheme of Arrangement and is subject to the satisfaction of customary closing conditions, including the approval of the current shareholders of PA and the UK court (pursuant to the scheme) as well as the UK Financial Conduct Authority.
Jacobs expects the transaction to close by the end of its fiscal 2021 second quarter.
