Science Applications International Corp. (SAIC) is acquiring rival Engility for $2.5 billion in stock. The deal creates a $6.5 billion IT consulting and professional services firm focused on government agencies.
The deal apparently values Engility at a lofty 14.7 to 15 times annual EBITDA, ChannelE2E estimates. That's far higher than typical IT services buyouts of 6 to 8 times annual EBITDA. The 14.7 to 15 times EBITDA multiple is based on Engility's Fiscal Year 2018 guidance of $160 million to $170 million annual EBITDA, which the company disclosed on October 1.
The Buyer: SAIC provides technology integrator, life cycle services and solutions in the technical, engineering, intelligence, and enterprise IT markets. The company has roughly 15,000 employees -- focused mainly on U.S. federal government agencies. SAIC, based in Reston, Virginia, has annual revenue of more than $4.5 billion, according to the company's website.
The Seller: Engility was previously known as L-3 Services. The company became an independent publicly-traded corporation in July 2012 as part of a spin transaction by L-3 Communications Corporation. Engility offers system engineering and integration, cyber, high performance computing, enterprise modernization, mission ops support, readiness and training to the government market.
Engility's clientele include federal civilian (24 percent), defense (40 percent) and intelligence (36) organizations. The company generates more than $1.9 billion in annual revenues, and has roughly 8,000 employees, according to a fact sheet from the firm.