Leidos (NYSE:LDOS) executives outlined the company’s planned all-cash acquisition of ENTRUST Solutions Group during a conference call, framing the deal as a major step in advancing its “North Star 2030” strategy and accelerating growth in power and energy infrastructure engineering services.
Strategic rationale centers on energy growth pillar
CEO Tom Bell said the acquisition is intended to “turbocharge” Leidos’ energy business, which he described as a “hidden gem” within the company with double-digit growth and double-digit margins. Bell positioned the transaction as aligned with Leidos’ strategy of focusing on growth markets where customer demand is rising and where Leidos believes it has differentiated capabilities.
- Alignment with the North Star 2030 strategy
- Complementary capabilities and customer bases
- Cultural compatibility intended to support rapid integration
- What management described as early-stage, transformational investment in U.S. energy infrastructure
- A fragmented energy engineering market that is beginning to consolidate, increasing the importance of scale
Bell also noted Leidos divested a “non-core legacy energy asset” known as Varec last year as part of sharpening its focus within the energy growth pillar.
How ENTRUST expands Leidos’ capabilities and footprint
Management described ENTRUST as a power and utilities engineering and design firm focused on electric and gas infrastructure, supported by what Bell characterized as visible revenue tied to long-term master service agreements with diversified blue-chip clients.
Bell said the combination would create an “integrated platform” with engineering and program management capability across power generation, power delivery, and gas transmission and distribution. He also emphasized cross-selling opportunities, including bringing Leidos’ cyber and IT services to ENTRUST’s customer base and leveraging ENTRUST to increase Leidos’ exposure to electric power generation and gas markets.
Executives highlighted that the deal expands Leidos’ national footprint. Bell said utilities often value providers with presence in their service regions due to local requirements that can vary by state and municipality.
Cultural fit and scale positioning
Bell said due diligence pointed to “unique cultural alignment,” citing similar go-to-market approaches, KPIs, organizational structures, and compensation and benefit levels. ENTRUST would add approximately 3,100 employees to Leidos, which Bell said supports capacity in a market where qualified labor is critical.
Leidos executives argued that scale is increasingly important as customers prefer fewer providers with broader geographic reach and deeper engineering capability. Bell said that upon closing, Leidos expects to be the third-largest provider of transmission and distribution engineering services and the fourth-largest power engineering firm in the U.S. He also emphasized that the transaction would keep Leidos as a “power engineering pure play” without entering construction and associated construction risk.
Financial terms, funding plan, and timing
CFO Chris Cage said ENTRUST is expected to contribute about $650 million in annual revenue at “attractive margins,” along with “clear line of sight” to double-digit revenue growth. Cage described the combined energy business as a $1.3 billion platform.
Leidos plans to acquire ENTRUST for an all-cash purchase price of approximately $2.4 billion. Cage said that net of the present value of a tax asset, the price implies a multiple of about 16x ENTRUST’s next-12-month EBITDA, which he called favorable relative to similar transactions.
Cage said the company expects the transaction to be accretive to adjusted EPS in 2027 after one-time transaction-related expenses, with “significant accretion thereafter” as revenue and cost synergies are realized. When asked to quantify synergies, Cage said the company ultimately expects “tens of millions of dollars” of bottom-line synergy benefits, but indicated more specificity would come when the deal is incorporated into guidance after closing.
To finance the acquisition, Cage said Leidos has a committed bridge facility but plans to issue $1.4 billion in bonds during the next open window, use $500 million of cash on hand, and fund the remainder with $500 million in commercial paper expected to be paid down over the course of 2026. Leidos expects leverage of 2.6x gross debt to trailing-12-month EBITDA on a pro forma basis after closing, which Cage said is within the company’s target range and leaves room for future capital deployment. The transaction is expected to close in the second quarter of 2026, subject to regulatory approvals and other customary conditions.
Q&A: contract structure, margins, and market drivers
In response to questions about the durability of ENTRUST’s margins and contract terms, Cage said ENTRUST’s master service agreements vary, often spanning three to five years and commonly renewed if performance is strong, while in some cases having no end date. On project economics, Cage said the work is typically time-and-materials, sometimes fixed-price, with no cost-plus arrangements. He also noted this business model differs from traditional backlog reporting, with work often consisting of shorter-duration tasks under broader master service frameworks.
Executives also tied the acquisition to broader energy infrastructure investment trends. Bell referenced an executive order on strengthening U.S. grid reliability and security and cited rising electricity demand driven by technological advancements, data centers, and domestic manufacturing. Bell also said Leidos expects to bring cybersecurity capabilities more prominently into the utility market as part of the expanded platform.
On customer concentration and credit risk, management said due diligence showed ENTRUST serves blue-chip clients and that accounts receivable turnover and customer payment history were reviewed. Cage said he did not expect any single customer to represent more than 10% of sales, based on what had been identified so far.
When asked about integration and confidence relative to prior Leidos M&A outcomes, Bell said the company approached the deal as part of a deliberate strategy rather than opportunistic buying. He also said the acquisition would be integrated under the same leadership team that completed the Kudu acquisition last year, which he said was accretive from day one. Cage added that synergy efforts would focus on applying technology rather than eliminating positions.
About Leidos (NYSE:LDOS)
Leidos is an American technology and engineering company that provides services and solutions to government and commercial customers, with a strong focus on national security, defense, intelligence, and civil government markets. The company delivers systems integration, engineering, cybersecurity, software development, data analytics, cloud migration and managed IT services, as well as mission support for complex programs. Leidos’ work spans areas such as C4ISR (command, control, communications, computers, intelligence, surveillance and reconnaissance), secure communications, sensors and systems engineering, and health IT solutions for public-sector healthcare programs.
Leidos traces its corporate roots to Science Applications International Corporation (SAIC) and emerged as an independent, publicly traded company following a corporate separation in 2013.
