Serco to acquire Northrop Grumman’s MT&S business

Deal is worth $327 million

Serco, a UK-based Serco Group subsidiary, has agreed to acquire Northrop Grumman’s Mission Training and Satellite Ground Network Communications Software (MT&S) business for $327 million (£264 million) in cash.

The acquisition positions Serco to expand its footprint in the US defence sector, as MT&S offers the US military advanced mission training services and satellite ground network optimisation software.

MT&S plays a pivotal role in supporting mission readiness for the armed forces and provides technology-enabled services to various US military branches, including the Army, Space Force, Air Force, Navy, and Combatant Commands. Serco’s acquisition of MT&S further strengthens its capabilities in synthetic training, satellite communications software, and technology solutions tailored to military requirements.

In a statement, Mark Irwin, Chief Executive of Serco Group, expressed his enthusiasm about the deal, noting that it is part of a broader strategy to enhance Serco’s presence in North America. “Through organic growth and strategic acquisitions, we have doubled revenue and more than tripled profit in Serco’s North America business in recent years. MT&S provides an excellent opportunity to continue that success,” Irwin said.

He added: “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.”

MT&S’s services include advanced simulation-based training and mission rehearsal capabilities, which are essential for preparing warfighters for multi-domain immersive environments. Its flagship offerings include the Mission Command Training Program (MCTP), which coordinates advanced training exercises based on US Army principles, tactics, and procedures, allowing soldiers to train with realistic scenarios. Furthermore, MT&S operates the Distributed Mission Operations Network (DMON), a secure system that enables aircrews from different locations to train together in high-fidelity virtual environments.

Additionally, MT&S optimises satellite ground station performance with software that improves communication planning and network monitoring, making satellite ground networks more efficient. The combination of these capabilities will be crucial in supporting Serco’s growth in defence and technology-enabled services.

The acquisition, expected to be completed in mid-2025 pending regulatory approval, will see Serco hire nearly 1,000 new employees from MT&S, further enhancing its workforce expertise in the defence sector.

From a financial standpoint, Serco projects the MT&S business to generate approximately $300 million (£242 million) in revenue in the calendar year 2025. The company also expects to earn an underlying operating profit of $34 million (£27 million), with a profit margin of around 11%. The deal is also expected to increase Serco’s underlying earnings per share (EPS) by mid-single digits in 2026, its first full year of ownership.

This acquisition will increase Serco’s exposure to the US market, becoming the most significant contributor to its overall revenue and profit following the transaction. Defence will become the company’s largest sector, representing approximately 40% of total Group revenue. The acquisition also enhances Serco’s ability to provide innovative, technology-driven solutions, significantly improving its competitiveness in the global defence sector.

Irwin further emphasised the strategic value of MT&S, stating that it would bolster Serco’s position in both the US defence market and internationally. “MT&S offers best-in-class military training and satellite communications software solutions, previously concentrated in the US market. We see significant opportunities to expand these capabilities into our other existing markets, including the UK, Australia, and Europe,” he explained.

The acquisition strengthens Serco’s broader portfolio of services and positions the company as a leading player in the rapidly evolving defence and technology services industry. By leveraging MT&S’s track record in delivering large-scale programmes for the US Department of Defence, Serco expects to enhance its existing pipeline and generate new domestic and international business opportunities.

The deal also reflects Serco’s ongoing efforts to invest in technology-enabled services integral to modernising defence capabilities worldwide. As the global defence landscape evolves, MT&S’s focus on military training and satellite communications will provide Serco with a strong foundation for continuing to expand its offerings and support critical national security initiatives.

Image: MT&S’s services include advanced simulation-based training and mission rehearsal capabilities essential for preparing warfighters in multi-domain immersive environments. Credit: Serco

Last Updated on 1 month by Arnold Pinto