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International outsourcing services company Serco has agreed to acquire Northrop Grumman’s mission training and satellite ground network communications software business for $327 million in cash.
Serco, a subsidiary of Serco Group plc, expects the sale to build additional scale for Serco in North America and provide further opportunities for Serco to grow organically in both North America and internationally.
The business provides the US military with advanced mission training services, and software that makes satellite ground networks more efficient. With expertise in training services and software engineering, and a track record of innovation, it supports programmes across the US Army, Space Force, Air Force, Navy, Combatant Commands and international partners.
“We have approximately doubled revenue and more than trebled profit in Serco’s North America business in recent years through a successful combination of organic growth and strategic acquisitions. MT&S provides an excellent opportunity to continue that success,” according to Mark Irwin, Serco Group Chief Executive.
“The acquisition increases our scale, capabilities and growth potential in US defence, the largest defence market in the world, as well as providing solutions we can offer to our customers worldwide.
“The acquired capability delivers comprehensive, critical, technology-enabled services fully aligned to the US military’s focus on enhancing warfighting standards and readiness through solutions that are both efficient and effective.
“We look forward to welcoming nearly 1,000 new colleagues from MT&S to Serco and are excited to add their knowledge and experience to our work supporting the US Department of Defense’s enduring mission to provide the combat-credible military forces needed to protect the security of the nation.”
The acquisition is expected to increase participation in the US market and the international defence sector, according to the company. The combination of Serco and MT&S is expected to further enhance the growth potential of technology-enabled military training and satellite ground network software services.
MT&S is expected to advance expertise in synthetic training, exercise simulation, and satellite ground network software services. Training represents a significant proportion of defence investment, and the acquisition materially strengthens Serco's position in the market, providing a strong platform for future organic growth.
It's understood that MT&S will likely benefit from being part of Serco where services are core and defence training is a strategic priority area. Under the change, MT&S will have a lower indirect cost base, significantly enhancing its competitiveness.
MT&S has a strong track record delivering large programmes in training, space and technology services for the US Department of Defense. The ability to reference this past performance will enhance Serco's ability to win new work in existing pipelines.
"Exporting MT&S’s capabilities outside of the US: Military training and satellite ground network communications software capabilities are critical services for armed forces around the world," according to Serco.
"MT&S offers best in class solutions in these areas, which have so far been primarily limited to the US. We see significant applicability to our other existing markets, including the UK, Australia, and Europe."
