Financial Information (USD)

• Enterprise Value: Approximately $705 Million
• EV/EBITDA: 9.65x

Transaction Details

• One Equity Partners LLC has entered into a definitive agreement to sell IT services firm Computer Design & Integration to Berkshire Partners-backed AHEAD. The agreement values CDI at approximately $705 million including debt.
• To fund the transaction, AHEAD plans to issue an incremental $600 million term loan. As AHEAD is already close to their credit threshold, planning to fund the CDI acquisition through debt is an aggressive plan and could have a detrimental effect on their credit per the rating agency.
• The transaction brings opportunities for roughly $23 million of cost and revenue synergies that have been identified by the company, supporting the company’s ability to deleverage post-transaction.
• The acquisition should be accretive for AHEAD’s business if the integration is successful.
• With the aggressive levels of debt financing proposed in the agreement, it will push the S&P Global Ratings-adjusted debt balances of AHEAD to roughly $1.73 billion. With pro forma EBITDA for the TTM period ending September 30, 2023 estimated to be around $230 million, this will push the pro forma adjusted leverage at the time of closing to approximately 7.4x.
• The deal is expected to close in early February.

martinwolf Analysis

• M&A & Credit Market Improvement: After a relatively dry M&A market in 2023, this deal represents not only a resurgence of M&A activity but also availability to get funding within credit markets.
• Strategic Consolidation: With AHEAD landing at number 32 on the CRN’s Solution Provider 500 list, and CDI close behind at number 50, this acquisition will further strengthen AHEAD’s positioning in the highly competitive and fragmented industry of IT outsourced services.
• Focus on M&A: Since being acquired by One Equity in early 2020, CDI has made six acquisitions tripling both revenue and employee count from 2020 – 2022, with the goal of $2 billion in revenue in their sights.
• Leveraging Momentum: Although the aggressive strategy of funding this acquisition through debt will strain AHEAD’s credit metrics – with adjusted leverage for the 12-months-ending September 30, 2023 already at 6.2x – the ability to offer more services, opportunities to cross sell, improved expertise in practice areas, better utilization of sales and technical resources, as well as CDI’s continued growth trajectory will outweigh the risks.

martinwolf was not the advisor in this transaction.