The IT consulting firm is looking to deploy around $4 billion by 2025, mostly on acquisitions that will expand its operations into sectors such as healthcare and cyber.
Booz Allen plans to spend about $4 billion between April 2022 and March 2025, primarily on acquisitions, executives said at the company’s investor day last week. This is more than the $1.3 billion total spent during the last four fiscal years, the most recent one ended in March. Most of that money went to buybacks and dividend sharing.
The change comes in the form of competitors—including Leidos Holdings. Inc.
and Science Applications International Corporation
, which was one company until its 2013 spinoff—is snatching away other businesses. According to data provider Refinitiv, this year has been busy for mergers and acquisitions, with the value of announced deals climbing to $4.46 trillion worldwide as of October 11, up 84% from the prior-year period.
National security company Leidos said last week that it plans to deploy $3.5 billion in capital through 2024 pending board approval, with 64% of the total going toward a mix of acquisitions and share buybacks. The rest will be spent on dividend, capital expenditure and debt repayment, it said.
Leidos said it invested about $4.9 billion in the two-and-a-half years that ended in June, most of which went toward acquisitions. In May, it paid $380 million for the ship-design firm Gibbs & Cox Inc.
Mr Howell said Booz Allen intends to tap the $1.6 billion of liquidity on its balance sheet, which includes cash and access to a line of credit of about $1 billion. According to a regulatory filing, the company’s cash and cash equivalents totaled $621.9 million as of June 30, up 0.2% from a year ago.
“We want to put that capital to good use,” Mr. Howell said, referring to the $1.6 billion.
In July Booz Allen said its revenue rose 1.7% to $1.99 billion for the quarter ended June 30, up from the prior-year period. Its net income fell 29% to $92.1 million due to acquisition-related costs. The CFO said the company will continue to seek small and medium-sized firms as part of its annual review of more than 100 potential acquisition targets.
In June, Booz Allen acquired Liberty IT Solutions LLC, a Herndon, VA-based health-focused IT consulting firm, for $725 million. This was followed by a deal last month to buy the remaining stake in Tracepoint, a cyber security services provider, for an undisclosed amount.
The company is considering more acquisitions, similar to the Liberty deal, because it expects more demand for those services, Howell said. “It would be the sweet spot to have such transactions in future,” he said.
The company’s chief strategist, Matt Calderone, said at its Investor Day last week, Booz Allen will also look to aim to gain expertise in services related to cyber security, artificial intelligence, data analytics and other aspects of digital transformation.
Mr. Howell said the acquisition is expected to help boost the company’s revenue, which is estimated to increase to about $8.6 billion in the year ending March 31, 2022, up 10% from the previous year. Is.
The biggest challenge for Mr. Howell will be integrating the company’s acquisitions due to the limitations of virtual communications during the COVID-19 pandemic, said Sheila Kahyoglu, a senior equity research analyst at investment bank Jefferies Group.
“Maintaining the people and culture is probably something they will focus on a lot more than other companies,” said Ms. Kahyoglu. “While integrating a people-focused business into a virtual environment, you want to make sure you don’t reduce the workforce.”
The company had about 28,600 employees as of June 30, up 4.4% from a year earlier, a filing shows.
Mark Maurer at [email protected]