Serco Enhances US Defense Reach with $327 Million Acquisition from Northrop Grumman

2025-01-30 companies

Los Angeles, Thursday, 30 January 2025.
Serco is set to acquire Northrop Grumman’s mission training division, boosting its US revenue to over $2 billion and integrating nearly 1,000 new employees, pending regulatory approval.

Strategic Expansion Details

Serco Group plc (LSE: SRP) has announced its agreement to acquire Northrop Grumman’s Mission Training and Satellite Ground Network Communications Software Business (MT&S) for $327 million (£264 million) in cash [1][2]. The transaction, announced on January 30, 2025, is expected to generate approximately $300 million in revenue and $34 million in underlying operating profit in calendar year 2025 [2]. This strategic move will significantly enhance Serco’s presence in the US defense sector, with the defense division projected to constitute approximately 40% of Serco’s Group revenue post-acquisition [5].

Operational Impact and Integration

The acquisition will bring nearly 1,000 employees to Serco, adding crucial expertise in digital engineering and satellite ground communications [1]. The MT&S division specializes in providing technology-enabled training services to the U.S. military, supporting programs across the Army, Space Force, Air Force, Navy, and Combatant Commands [5]. A key asset in this acquisition is the Distributed Mission Operations Network (DMON), which provides secure connectivity and network interoperability for aircrews worldwide [6].

Financial Implications

This strategic purchase is expected to be mid-single digit accretive to underlying earnings per share (EPS) in 2026, the first full year of ownership [2][5]. The transaction will add approximately 0.9x to Serco’s net debt:EBITDA ratio, while maintaining leverage within the target range of 1-2x post-transaction [2]. Mark Irwin, Serco Group Chief Executive, noted that the company has ‘approximately doubled revenue and more than trebled profit in Serco’s North America business in recent years’ [4].

Timeline and Future Prospects

The acquisition is subject to regulatory approvals and is expected to close in mid-2025 [1][2]. Upon completion, North America will account for approximately 50% of Serco’s Group underlying operating profit [5]. Tom Watson, CEO of Serco in North America, emphasized that ‘this acquisition is an important next step in our strategic journey and underscores Serco’s dedication to growth and innovation in mission-critical solutions’ [1].

Sources

acquisition Serco