US engineering company KBR has acquired Frazer-Nash Consultancy Limited from UK-based Babcock International Group for approximately $400 million in cash -- or around 14.7 times adjusted EBITDA expectations for 2022, according to a roughly ChannelE2E estimate.
This is technology M&A deal number 520 that ChannelE2E has covered so far in 2021. See all technology M&A deals for 2021 and 2020 listed here.
In this deal, seller Frazer-Nash has systems engineering, systems assurance, and technology expertise. The company works with clients across the defense, energy, and critical infrastructure sectors, primarily in the United Kingdom and Australia. Dig a little deeper, and you'll notice that Frazer-Nash also has data science, cybersecurity and clean energy know-how.
Frazer-Nash Buyout: The Valuation Math
Frazer-Nash’s projected revenue for fiscal 2022 is between $150 million and $170 million with adjusted EBITDA margins in the upper-teens and strong free cash flow generation, according to KBR.
So what's the EBITDA multiple valuation on this deal? Hypothetically speaking, let's assume the following for Frazer-Nash:
- $160 million in revenue for fiscal 2022.
- At 17 percent adjusted EBITDA margins, that's $27.2 million in adjusted EBITDA dollars for fiscal 2022.
- The resulting valuation on the deal is 14.7 times adjusted EBITDA for 2022 (or $400 million divided by $27.2 million).
Of course, the valuation multiple could be a bit higher or lower based on actual Frazer-Nash business performance for 2022, but we think we're in the proverbial ballpark.
KBR Acquires Frazer-Nash: Executive Perspectives
In a prepared statement about the deal, KBR President and CEO Stuart Bradie said:
"This acquisition is a continuation of our strategic journey to advance upmarket to deliver innovative, digitally-enabled solutions to governments and customers around the world. Frazer-Nash adapted ahead of the curve to evolve with changing market dynamics, whilst delivering consistent profitable growth. I am excited to welcome this tremendous team to our company, and with market tailwinds in our favor, we are well positioned to continue our journey together."
KBR employs approximately 29,000 people worldwide with customers in more than 80 countries and operations in 40 countries.
Additional insights from Joe Panettieri.