ER&D Staffing Firm CDI is Acquired by the Owner of Belcan!

/ August 16, 2017/ Aerospace, Belcan, CDI, M&A (large, with revenues above $50m), US, US Federal

AE Industrial Partners (AEI) has announced the acquisition of CDI Corp, a US. listed IT and ER&D services staffing firm. AEI is valuing CDI Corp ~USD 158m, or $8.25 per share, representing a 36% premium. AEI expects to close the acquisition by Q3 2017.

CDI is a sizeable organization with 2016 revenues of USD 864m, a headcount of 700, and 5,600 billable personnel. The company has been struggling for years with declining of revenues (-12% each year, since 2014), and losses (2016: USD -32m). It has suffered from several factors including overall price pressure in the staffing business, and declining revenues from its two major clients (IBM and Canadian pipeline projects). As a result, CDI Corp has on a disposal mode recently (notably moving out of the U.K., and becoming a North America-focused company). After its CEO left in late 2016, the company’s management had announced it was comtemplating strategic alternatives.

The new owner of CDI Corp, AE Industrial Partners, is also the owner of Belcan Engineering, (since Q3 2015). Belcan is of one CDI’s main competitor in the ER&D and IT services space, in the staffing, and project businesses.

There was no mention of Belcan in the joint CDI / AEI press release. Yet, we are clearing expecting AEI to consolidate and merge Belcan and CDI Corp, and give birth to a USD 1.5bn ER&D and IT services staffing giant with only USD 240m in revenues derived from ER&D projects. We are guessing that AEI will be eager to stabilize the staffing business and derive cost synergies. AEI needs to reduce the costs of the combined companies by 2-4% to make CDI Corp break-even, in operational terms. This sounds achievable.

The next step will be expand the combined companies in the project business, and get access to higher margins

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