PA has grown strongly during the five-year Carlyle investment period through a combination of organic and M&A-led growth (seven acquisitions) which has driven global expansion. This has resulted in EBITDA more than doubling over the period of Carlyle’s investment and compound annual revenue growth of 12% since 2016.
From its inception in 1943, PA has worked with a wide range of clients – from start-ups with a promising idea to change the world to some of the most important global companies and organisations – to find innovative ways to be faster and nimbler, and to create the services and products that grow their businesses, delight their customers and serve citizens. PA has developed world-leading innovations, for example with Virgin Hyperloop to reinvent transport, with Ori Biotech to revolutionise cell and gene therapy manufacturing, and with iPredict™, the world’s first AI and machine learning system, to predict failures in critical underground electricity distribution assets.
The new strategic partnership with Jacobs will enable PA to build on this success and to accelerate its growth plan through geographic expansion, particularly in the US, and additional acquisitions. The partnership will see PA further enhance its market-leading capabilities in innovation, design, digital and technology. The private equity style investment from Jacobs will allow PA to retain its independence, alongside current culture, brand and values. The continued share ownership by PA employees is a key feature of the transaction.
John Alexander, Chair of PA, said: “We have undertaken a thorough process to screen and select potential new external investors that align with PA’s culture, independence and ambition. Jacobs stood out during the selection process because of the close affinity between our respective values and their reputation as one of the leading global providers of technical and professional services to clients across the public and private sectors. We were hugely impressed with Jacobs’ commitment to a PE style investment to support our values and purpose and accelerate our growth trajectory.’’
Ken Toombs, CEO of PA Consulting, said: ‘’We would like to thank Carlyle for the excellent partnership over five years. Together we have significantly grown the business and we are proud of what we have accomplished. We see Jacobs as the ideal partner for PA because of their market leading reputation, the alignment with our respective ambition and the opportunities to better serve clients through access to Jacobs’ global platform and client base, positioning us for the next phase of growth. Their purpose of creating a more 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 complementary capability.’’
Jacobs Chair and CEO Steve Demetriou said: ‘’We are excited by this partnership and the opportunity to set a new industry benchmark together for technically-driven solutions that drive value for our clients, employees and investors – and changing the shape of our industry. We look forward to working together to deliver PA’s ambitious growth plans and strengthening their reputation as the leading provider of end-to-end innovation capability.’’
Fraser Robson, a Managing Director in the Carlyle Europe Partners advisory team said: “It has been a great pleasure working with the PA team. Together we have invested in people, technical capabilities, and expanded the PA platform through strategic acquisitions. This has delivered strong growth and we are delighted with the role we have played in establishing PA as a global industry leader in its field.”
Carlyle invested in PA Consulting in December 2015 through Carlyle Europe Partners IV (CEP IV), a European-focused, upper-mid market buyout fund. The exit of CEP IV’s stake in PA is another example of Carlyle’s strategy of working in partnership with management teams to execute value creation initiatives.
Transaction terms and financing
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 approximately 35% ownership stake at closing. Preferred equity holders receive a 12% compounded annual coupon accrual. A sweet equity incentive pool of 25% of the common equity is available for issuance to current and future partners and employees of PA Consulting. The sweet equity pool will be funded after satisfying the coupon on the preferred equity. In addition, Jacobs will provide debt financing to PA 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. Jacobs intends to fund the acquisition through a combination of cash-on-hand and existing and incremental debt facilities.
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 U.K. Court (pursuant to the Scheme), as well as the U.K. Financial Conduct Authority.
Jacobs expects the transaction to close by the end of its fiscal 2021 second quarter.
JP Morgan and HSBC are serving as financial advisors to The Carlyle Group and PA Consulting. Linklaters is serving as legal counsel to The Carlyle Group and PA Consulting, and Dickson Minto is serving as legal counsel to PA regarding its new partnership with Jacobs.