Serco Group (SRP) M&A announcement summary

Deal rationale and strategic fit

• Expands the North American defence platform by over 15% to ~$2.5bn in revenue; defence is expected to account for over 45% of revenue.

• Adds Space Force programme support, advanced sensors, imaging, target recognition, persistent surveillance and Navy carrier aircraft control capabilities.

• QQUS supports U.S. military, Space Force and intelligence missions, with 800+ specialists across around 100 programmes and no major rebids due before 2028.

• Builds on four defence-focused acquisitions since 2018, including the MT&S integration in 2025, and complements existing programme, engineering, operations and technology strengths.

Financial terms and conditions

• Total cash consideration is $292m: $237m for the operating business and a $55m acquired tax asset, valued on a net present value basis and usable against North American taxable profits.

• 2027 forecast: ~$370m revenue and $21m underlying operating profit; implied acquisition multiple is 9.9x including $3m run-rate synergies, excluding the tax asset and ~$9m acquisition and integration costs.

• Funded from existing cash and committed debt facilities; leverage expected to rise ~0.6x, remain within the 1–2x target range and decline thereafter.

• Expected to be accretive to underlying EPS in 2028; ROIC is expected to meet WACC in the third full year of ownership and exceed it thereafter, excluding the tax asset from consideration.

• The planned £150m 2026 share buyback will continue as scheduled.

Synergies and expected cost savings

• At least $3m of run-rate cost synergies expected by 2028; management identified ~$8m gross synergies, equivalent to ~$3m net benefit due to the cost-plus nature of parts of the portfolio.

• The acquired tax asset is expected to deliver over $100m in cash tax savings over 12 years.