LONDON - Ricardo plc, a global strategic, environmental, and engineering consulting company, has entered into an agreement to acquire 85% of Australian infrastructure advisory firm E3 Advisory. The acquisition, valued at approximately AUD $101.4 million (£51.0 million), is a strategic move to bolster Ricardo's presence in the environmental and energy transition solutions sector.
The initial acquisition is set to be completed in early January 2025, with the remaining 15% expected to be purchased by January 2028. This transaction is contingent upon the sale of Ricardo Defense, which was also announced today. The proceeds from this disposal will fund the acquisition and associated costs.
E3 Advisory is known for advising government and private clients on infrastructure projects, with expertise in transport, clean energy, water, and mining. This acquisition is expected to enhance Ricardo's service offerings and market reach in Australia, particularly in the rail and road sectors, which represent a significant portion of E3 Advisory's revenue.
Ricardo's CEO, Graham Ritchie, expressed enthusiasm for the strategic opportunity presented by E3 Advisory, highlighting the potential for increased strategy consulting and advisory services. He also noted the alignment of E3 Advisory's skilled team and growth potential with Ricardo's focus on energy and transport infrastructure.
The acquisition is anticipated to be immediately accretive to earnings per share and aligns with Ricardo's strategy, outlined in May 2022, to become a leader in environmental and energy transition solutions. Ricardo has previously enhanced its portfolio through bolt-on acquisitions and divestitures of non-core businesses, aiming for a high-growth, high-margin, and less capital-intensive business model.
E3 Advisory, founded in 2014, has demonstrated consistent profitability and strong operating cash flow, with a substantial government client base contributing to approximately 60% of its revenue. The firm's top clients include various agencies and companies in the transport, electricity, and water sectors.
The acquisition terms include an adjusted EBITDA multiple of c.8.6x based on FY23/24 figures, with the purchase price subject to adjustments for net debt, working capital, and other transaction-related factors. Payment for the initial stake will be made in three installments, with the first due in January 2025.
Ricardo's acquisition of E3 Advisory is a significant transaction under UK Listing Rules and does not require shareholder approval. The board of Ricardo unanimously supports the acquisition, believing it to be in the best interests of shareholders and consistent with the company's strategic objectives.
This article is based on a press release statement from Ricardo plc.
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