Jacobs moves to deepen PA Consulting investment with $1.6 billion deal

The evolving ownership of PA Consulting has taken a dramatic twist. After six years of investment from Jacobs, the professional services firm has decided to buy up PA’s remaining shares, in a deal reportedly worth more than $1.6 billion.

PA Consulting has transitioned through a number of investment models in recent years. In 2015, Carlyle Group took a majority stake in the UK-headquartered management and technology consulting firm – with the private equity firm’s injection of finance proving to be transformative for PA.

Using the investment to drive a new era of organic and inorganic growth, PA committed to a sustained campaign of merger and acquisition activity to drive its expansion. And with PA enjoying compound annual revenue growth of 12% since 2016, when Carlyle fulfilled the usual expectation of a private equity firm – exiting its investment within a four-to-five-year window – the deal yielded a significant return as it cashed out of its stake.

But rather than seeking investment from another private equity firm, PA took on backing from a perhaps surprising source. Global professional services firm Jacobs purchased Carlyle’s stake, in a deal which valued PA at over £1.8 billion. The deal was unusual as it saw Carlyle underwrite a private equity-style investment in another consultancy – which retained its independence.

Now, with that traditional four-to-five-year private equity exit window having passed, however, Jacobs has revisited its investment – and has provided a further surprise. Instead of selling up to make a return, it has doubled down, entering into a definitive agreement to purchase the outstanding interest in PA for approximately $1.6 billion (£1.216 billion).

In its announcement of the deal, Jacobs said full ownership of PA Consulting will allow deeper integration of advisory and digital capabilities into its broader portfolio. It will also help to accelerate growth in higher-margin consulting services tied to complex infrastructure and technology-driven programmes, according to the firm.

“Full ownership of PA Consulting will further strengthen Jacobs’ capabilities in advisory, digital and transformation services,” Jacobs noted in a release.

According to a Form 8-K filing with the US Securities and Exchange Commission, the transaction implies an enterprise value of approximately $4.0 billion (£3.05 billion) for PA Consulting, based on closing assumptions and expected adjustments. According to the filing, the acquisition is expected to be accretive to adjusted earnings within the first 12 months following closing.

Jacobs did not announce immediate changes to PA Consulting’s leadership or branding, though further information will be released when the deal approaches its end. That may still be some way off, however, as Jacobs also noted the transaction will require national security approvals in the UK and Denmark, due to PA’s involvement in government, defence and other sensitive infrastructure-related and public sector advisory work.