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Navigant to Sell DFLT and TAS Businesses to Ankura for $470M

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Navigant Consulting, Inc. (NCI - Free Report) yesterday announced that it has reached a deal to sell its Disputes, Forensics and Legal Technology (DFLT) segment and Transaction Advisory Services (TAS) practice to Ankura Consulting Group, LLC for $470 million.

Ankura is engaged in business advisory and expert services and is a portfolio company of Chicago-based private equity firm, Madison Dearborn Partners (MDP).

Navigant expects to receive nearly $370 million of cash proceeds from the sale (assuming payout of taxes, transaction and separation-related costs). The deal, subject to customary regulatory approvals and closing conditions, is expected to close in the third quarter of 2018.

Aglimpse at Navigant’s price trend reveals that the stock has had an impressive run on the bourse on a year-to-date basis. Shares have returned 25.3%, significantly outperforming the industry’s rally of 4.2% year to date.

 

Increasing Focus on Potential Areas

We believe that the sale is part of Navigant’s efforts to cut down less profitable businesses and channelize resources to areas that show real promise.

Revenues from Disputes, Forensics and Legal Technology segment came in at $322.37 million in 2017, down from $338.24 million at the end of 2016. Revenues before reimbursements (RBR) from the segment declined to $304.55 million in 2017 from $316.37 million in 2016. Operating profit also decreased 10% to $97.56 million in 2017 from $108.69 million in 2016.

The disposal will help Navigant streamline its focus on management consulting and managed services across high-growth industries of healthcare, energy, and financial services. Navigant intends to use the cash proceeds of the sale to invest in digital, data and analytics solutions, mergers and acquisitions.

The proceeds will also be allocated to return as much as $175 million (in capital) to shareholders through share repurchases in the next 12 months, initiate a dividend policy (whose terms will be decided at or post deal closure) and repay its credit facilities (until there is any extra need for capital).

Zacks Rank & Stocks to Consider

Currently, Navigant is a Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the broader Business Services sector include NV5 Global, Inc. (NVEE - Free Report) , The Dun & Bradstreet Corp. (DNB - Free Report) and FLEETCOR Technologies, Inc. (FLT - Free Report) . While Dun & Bradstreet sports a Zacks Rank #1, NV5 Global and FLEETCOR carry a Zacks Rank #2 (Buy).

The long-term expected earnings per share (three to five years) growth rate for NV5 Global, Dun & Bradstreet and FLEETCOR Technologies is 20%, 4.5% and 16.5%, respectively.

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