Cognizant’s Acquisition of ER&D Services Company Belcan Sealed for $1.3 billion

Cognizant Acquires ER&D

Three points you will get to know in this article:

  • Cognizant to acquire Belcan for $1.3 billion (Rs10,860 Cr approximately), bolstering ER&D capabilities.
  • Anticipated annual revenue boost of over $800 million (Rs 6,680 Cr approximately) post-acquisition.
  • Expected synergies exceeding $100 million (Rs 836 Cr approximately) annually within three years.

Strategic Acquisition of Belcan by Cognizant

Cognizant logo

Cognizant, a technology firm, has confirmed its intention to acquire Belcan, LLC, in a definitive agreement valued at roughly $1.3 billion. Belcan, owned by AE Industrial Partners, is a top global provider of Engineering Research & Development (ER&D) services.

Strategic Benefits of the Acquisition

The transaction, which will be settled through a combination of cash and stock, pending standard adjustments, is expected to greatly strengthen Cognizant’s presence in the ER&D sector, according to the company’s announcement. Belcan, a prominent player in Engineering Research and Development (ER&D), offers vital digital engineering services to a diverse clientele in commercial aerospace, defense, space, marine, and industrial sectors, primarily in North America and the United Kingdom (UK). Cognizant aims to enhance its ER&D capabilities and establish a robust presence in the aerospace and defense (A&D) industry by leveraging Belcan’s expertise. This strategic merger will integrate more than 6,500 engineers and technical consultants into Cognizant, bolstering its technological strength and expanding its client base in these rapidly growing sectors.

Cognizant anticipates that Belcan will contribute more than $800 million annually to its revenue in 2024, subject to the timing of the transaction closure. Belcan has demonstrated a compound annual growth rate (CAGR) of 8% over the past two years. Cognizant foresees immediate revenue growth and increased shareholder value as a result of this acquisition. The acquisition is expected to generate synergies amounting to over $100 million in annual revenue within three years, with further cost synergies anticipated over time. Additionally, the transaction is projected to have a neutral impact on earnings per share (EPS) in 2025 and become accretive in 2026.

Client and Industry Perspectives

Ravi Kumar S., CEO of Cognizant, highlighted that acquiring Belcan will strengthen Cognizant’s standing in the ER&D services sector by leveraging Belcan’s extensive engineering expertise and specialized knowledge. “Belcan’s clients will now have access to Cognizant’s cutting-edge AI, Cloud, and Data technologies, while Cognizant’s clients will benefit from Belcan’s engineering proficiency,” Kumar remarked.

Leadership's Outlook and Strategic Partnership

Lance Kwasniewski, CEO of Belcan, shared his enthusiasm for the merger, emphasizing that it will offer substantial value to customers and new opportunities for employees. “This partnership will enable our team to take advantage of significant industry trends, such as increased outsourced ER&D spending and strong aerospace demand,” Kwasniewski added.

Acquisition Timeline and Consideration Details

The completion of the acquisition is anticipated by the end of September 2024, subject to regulatory approvals and other customary closing conditions. The acquisition comprises a total consideration of $1.19 billion in cash and 1.47 million shares of Cognizant, valued at approximately $97 million based on the closing price of Cognizant shares on June 7, 2024. The cash component will be financed through a combination of available cash and debt. Cognizant intends to expand its share repurchase program to maintain a share count of 497 million for the entirety of 2024. Advisors for this transaction include Perella Weinberg Partners and Arnold & Porter representing Cognizant, and Jefferies, Solomon Partners, and Kirkland & Ellis advising Belcan.

Cognizant is set to acquire Belcan for 1.3 billion, aiming to strengthen its Engineering Research and Development (ER&D) capabilities and expand its presence in aerospace and defense. Belcan’s projected annual contribution of over 800 million will significantly boost Cognizant’s revenue in 2024. The acquisition is expected to create synergies of over $100 million annually within three years. With an anticipated completion by September 2024, Cognizant plans to finance the cash component using available funds and debt. This strategic move aligns with Cognizant and Belcan leadership’s shared vision of leveraging enhanced expertise and resources.

Peenak Maheshwari

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