Government IT Acquisition: Huntington Ingalls Buys Alion Science and Technology For $1.65B

Huntington Ingalls Industries has acquired Alion Science and Technology for $1.65 billion in cash. The investment was funded by Veritas Capital and is subject to customary adjustments. The deal’s enterprise valuation is 12.2X expected adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for 2022, the buyer said.

Alion is a solutions provider for the global defense marketplace. Alion will become part of Huntington Ingalls’ Technical Solutions division, the company said. The transaction is expected to close in the second half of 2021, subject to customary closing conditions.

Alion provides advanced engineering and R&D services in the areas of ISR, military training and simulation, cyber, data analytics, and other next-generation technology based solutions to the DOD and intelligence community customers, with the U.S. Navy representing about one third its current annual revenues.

Hunting Ingalls expects Alion to continue growing, pointing to more than $5 billion in estimated contract value and a “robust opportunity pipeline.” Alion has more than 3,200 employees with over 80 percent of employees maintaining security clearances, Huntington Ingalls said.

Huntington Ingalls Acquires Alion: “Significant Growth Potential”

Mike Petters, president and CEO, Huntington Ingalls

Andy Green, executive vice president, president of technical solutions, Huntington Ingalls

Mike Petters, HII’s president and CEO, commented on the deal:

“We established the Technical Solutions division in 2016 with a vision and strategy focused on partnering with our customers to solve their most pressing challenges. Today’s announcement, coupled with our previous investments in leading edge technologies, such as cybersecurity and autonomous systems, reflects our commitment to stay on the cutting edge of critical, high-growth national security solutions and generate significant long-term value for our shareholders.”

Andy Green, HII executive vice president and president of Technical Solutions, said:

“The combination of Alion and our Technical Solutions business represents a significant value creation opportunity that broadens our capabilities and customer access in our target markets. The experienced Alion team and the highly complementary solutions and products they provide are consistent with the strategic vision we have articulated for the Technical Solutions business, and we are excited about the significant growth potential this combination represents.”

Potential Financial Benefits

The deal is expected to offer strong financial opportunities for Huntington Ingalls. Among them:

  • The transaction is expected to be significantly cash flow accretive in fiscal 2022 and GAAP EPS accretive in fiscal 2023
  • Expands Technical Solutions’ projected pro forma 2021 to 2024 revenue CAGR to 7% to 9%
  • Expect Alion to contribute fiscal 2022 revenue of approximately $1.6 billion and Adjusted EBITDA1 of approximately $135 million
  • Enhances overall HII 2022-2024 FCF1 guidance by ~$200 million
  • Significant potential incremental long-term revenue synergies identified, particularly in the ISR and advanced military training and simulation markets

Huntington Ingalls Background

Huntington Ingalls Industries spun off from Northrop Grumman in 2011. The company is perhaps best known for being the largest military shipbuilding company in the United States. However, the company began making a foray into the government IT services market in 2019 when it acquired Fulcrum IT Services and G2 Inc.

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