Altran Group acquires Aricent, Strengthens Position in Engineering and R&D services

Altran, through its subsidiary Altran US, into a definitive agreement to acquire Aricent, a global digital player in design and engineering services, from a group of investors led by KKR, for a total enterprise value of €1.73 billion or $2.0 billion in an all-cash transaction.

Based on LTM June 2017 data, this corresponds to 10.6x EBITDA4 pre-synergies, and 8.0×4 post run-rate-synergies (14.4x EBIT pre-synergies and 9.9x EBIT4 post-synergies). The transaction has been unanimously approved by Altran’s Board of Directors and is expected to close in Q1 2018, subject to receipt of antitrust approvals and satisfaction of customary closing conditions. Following the transaction, the combined entity will become the undisputed global leader in ER&D services, a market expected to be worth €220 billion by 2020.

Aricent is a global digital player in integrated design and engineering services, primarily serving clients of the Communications and Technology, Semiconductor and Software industries. Headquartered in Santa Clara (California), Aricent brings design and engineering capabilities to help its clients get to market faster, transform legacy products to digital, and create new revenue opportunities.

Among the company’s assets is the iconic brand frog, which has with world-class design and client experience capabilities, outstanding knowledge and intellectual property for the Telecom, Software and Semiconductors industries.

Aricent also has solid experience in shaping large engineering outsourcing deals and key capabilities in key emerging technologies including Artifical Intelligence, Cognitive Systems, Internet of Things and software frameworks. Over the LTM June 2017, Aricent generated revenues of $687m with 10,500 employees and operated through 24 engineering centers and design studios, serving 360 clients globally.

"Through this acquisition, Altran will be uniquely positioned to offer an unmatched value proposition to its clients and outpace
competition. Altran will now have superior scale and scope, and now masters all four critical criteria necessary to lead the industry: a global presence and reach, leadership across most industries, strong expertise in key technology domains and a superior global delivery supply chain. This transaction acts as a catalyst allowing us to achieve Altran 2020. Ignition strategic goals as early as 2018. Current and future shareholders will benefit from this value-enhancing acquisition, delivering EPS accretion immediately while preserving our robust financial profile," explained, Dominique Cerutti, Chairman & CEO of the Altran Group.

"For 26 years, Aricent has positioned itself as a leading global design and engineering company, helping our clients solve their most complex challenges in today’s ever-changing, connected world. In doing so, we are well-positioned to merge our engineering and design capabilities with those of Altran to create a global leader in R&D engineering services with enormous scale, unparalleled capability, and unique and differentiated innovation. We are excited to join forces with Altran, an organization that seamlessly aligns with our values and core mission. This acquisition is a testament to Aricent’s long-standing and deep relationships with our clients and it recognizes the special talents and strength of our more than 10,500 dedicated Aricent employees. We look forward to working closely with Dominique Cerutti and his leadership team to bring even greater value to our clients," said, Frank Kern, CEO of Aricent.

Strategic Rationale

Altran and Aricent share a common vision of the drivers fueling accelerated growth in the ER&D market, and through their respective transformations have developed capabilities to match the four strategic criteria that top global clients expect from their ER&D partners.

Together, Altran and Aricent will have: Global scale and scope: close to €3 billion in revenues, 44,000 employees operating in ~ 30 countries,and outstanding client reach. The combined company will be No. 1 worldwide, no. 1 in Europe, no. 1 in the US Leadership positions in key industries: Aerospace, Automotive , Design & Innovative Product
Development, Life sciences, Semiconductors, Software & Internet, Telecoms Premier global delivery model: the significant build-up of the Indian footprint (ca.8,500 additional engineers) contributed by Aricent will provide Altran with a best-in-class industrialized supply chain, with a unique scale and balanced split through near/offshore locations (with 15,000 FTEs or 35% of total workforce), enabling the combined company to offer seamless end-to-end delivery to clients cost effectively Superior expertise in key technology domains, design, product & system engineering, digital & software.

The combination of these strengths will result in an enhanced client footprint: together with Aricent, Altran will consolidate its preferred access and long-term partnerships with top R&D spenders across all industries and leverage first class access to blue-chip US clients.