Cognizant Technology Solutions on Monday signed a definitive agreement to acquire Belcan, LLC, a US-based global supplier of Engineering Research & Development (ER&D) services, at a purchase price of approximately $1.3 billion in cash and stock.

The acquired business’ revenue contribution to Cognizant in 2024 depends on the timing of the close, but is expected to be over $800 million on an annualised basis. Revenue from the acquired business has grown at a compound annual growth rate (CAGR) of 8 per cent over the last two years.

Belcan is an established player in ER&D and provides mission-critical digital engineering services for a customer base across the commercial aerospace, defence, space, marine and industrial verticals, primarily in North America and the UK, says a Cognizant release.

The acquisition will expand Cognizant’s ER&D capabilities, building upon the company’s leadership in the Internet of Things (IoT) and digital engineering practice areas. Combining with Belcan will also add scale and enable Cognizant to establish leadership in the high-growth aerospace & defence (A&D) industry, with a blue-chip client base, deep domain expertise, and significant technological capabilities, with over 6,500 engineers and technical consultants, the release said.

“We believe that acquiring Belcan will strengthen Cognizant’s position in the sizable and fast-growing ER&D services market,” said Cognizant CEO Ravi Kumar S. “Belcan’s deep engineering capabilities and domain expertise across the aerospace & defence market will be complemented by Cognizant’s scale and multi-decade digital engineering expertise, providing Belcan’s blue-chip client roster access to our advanced AI, Cloud and data technologies.”

Kumar continued, “We see the opportunity to immediately accelerate revenue growth and create compelling shareholder value through our combined engineering capabilities. Belcan’s clients would gain access to Cognizant’s full suite of technology services, while Cognizant’s clients across the manufacturing, automotive, energy, and high-tech sectors will benefit from Belcan’s engineering skills.”

As a result of this transaction, Cognizant expects to significantly expand its access to the $190-billion ER&D services market, which is expected to grow at an over 10 per cent forward CAGR through 2026, complementing its existing IoT and Digital Engineering practice areas.

The acquisition will also help the company diversify into the A&D space and marine sectors, with a stable set of blue-chip clients; add a highly skilled, technical and accredited workforce and an employer of choice in ER&D services, and deliver over $100 million in annual revenue synergies within three years, with additional cost synergies expected over time, the release said.

Lance Kwasniewski, the CEO of Belcan, is expected to continue to lead the company, which will continue to operate under the Belcan name as an operating unit of Cognizant. Cognizant will also establish a dedicated integration programme office to drive execution against strategic and financial goals, the release said.