Private equity, Content, Vertical markets

IT Consulting Acquisition: Guidehouse Buys Navigant for $1.1 Billion

Guidehouse, backed by private equity firm Veritas Capital, has acquired Navigant Consulting for $1.1 billion, the companies have disclosed.

Ahead of the deal, Navigant was forecasting annual adjusted EBITDA from continuing operations of about $70 million to $80 million. Based on that forecast range, the deal's valuation was a lofty 13.75 times to 15.7 times annual adjusted EBITDA.

In stark contrast, most IT consulting firms sell for 4 times to 8 times annual EBITDA, with some higher multiples for businesses that have intellectual property, EBITDA margins of 20 percent or more, and strong recurring revenues, according to ChannelE2E's reporting.

Guidehouse Acquires Navigant: Company Backgrounds

Navigant shopped the professional services business to multiple potential buyers before inking the business sale to Guidehouse, Navigant CEO Julie Howard said in a prepared statement.

Guidehouse, a management consulting firm, was formed in 2018 when Veritas acquired and rebranded the U.S. public-sector consulting business from PricewaterhouseCoopers LLP. Guidehouse has 2,000 professionals who support such U.S. federal government agencies as the Department of Defense, Homeland Security, Veterans Affairs, Health and Human Services, and the Department of State, as well as numerous state and local governments.

Navigant Consulting is a professional services firm that offers advisory, consulting, outsourcing, and technology/analytics services. The company supports clientele in such vertical markets as healthcare, energy, and financial services.

For its second quarter of 2019, Navigant's fiancial results included:

  • Revenue of $223.1 million and $196.6 million respectively, up 21 percent from the corresponding quarter last year.
  • Adjusted EBITDA from continuing operations was $20.9 million, up $3.3 million compared to the corresponding quarter last year.
  • Net income from continuing operations of $8.6 million,  up $2.5 million or 40 percent compared to the second quarter 2018.

The financial results largely beat Wall Street's expectations.

Guidehouse Acquires Navigant: Executive Perspectives

Guidehouse CEO Scott McIntyre will lead the combined company, along with practice team leaders from both companies.

LinkedIn: Scott McIntyre, CEO, Guidehouse
LinkedIn: Scott McIntyre, CEO, Guidehouse

In a prepared statement, McIntyre said:

“The acquisition of Navigant is the next step in our journey to create the next generation global consultancy. Navigant is an exceptionally strong management consulting and managed services firm with some of the best minds in Healthcare, Energy, and Financial Services addressing the most complex commercial challenges their clients face. With complementary strengths in our focus areas, we will be strongly positioned to continue delivering innovative solutions to tackle some of the toughest challenges facing government and commercial clients, while building resilience into important missions and services. Bringing together best-in-class portfolios, highly talented teams, and digital-first business models — we look forward to the merger and the journey to come.”

LinkedIn: Julie Howard, CEO, Navigant

Added Navigant CEO Julie Howard:

“Following a review of strategic alternatives, including soliciting offers from a diverse group of potential strategic and financial partners, Navigant’s Board unanimously agreed that a sale to Guidehouse is in the best interest of Navigant shareholders, delivering immediate and certain value at an attractive premium. The combination of Navigant and Guidehouse will create a powerful, global consulting organization characterized by deep industry expertise and leading technical know-how. Our companies are aligned with similar cultures and strong core values. Through the integration of our two firms, our employees will enjoy expanded growth opportunities, and our combined clients will access a wider array of expertise, tools, and technologies to help them achieve their goals.”

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.