TRG | The Bottom Line – 5/16

Earlier this week Acuren (TIC) announced the acquisition of NV5 (NVEE) in a case of “buy the rumor, buy the news.” Acuren is a relatively new public company in the testing and inspection market, while NV5 has been public for over 10 years. There were rumors in late April of an Acuren and NV5 deal, which was confirmed earlier this week when Acuren reported Q1 earnings. The proposed acquisition would 1) essentially double Acuren’s revenue from $1B to $2B, 2) be accretive to pro forma EBITDA margins at 17.2% , and 3) greatly expand the tech-enabled offerings that typically carry a higher margin profile. Acuren now has a larger addressable market to sell into, and greater service offerings to cross sell across the platform. NV5 brings exposure to building solutions, geospatial and infrastructure customers, with significant increased exposure to IIJA funding and data centers. We view this transaction as similar to APG’s acquisition of Chubb, another Mariposa-backed company whose stock in recent weeks has hit 52 week highs. TRG would expect a similar playbook for Acuren that was executed for APG. With that in mind, we expect to see Acuren continue to upgrade and prune its client base, rapidly pay down debt (thought a combination of strong FCF and potentially a secondary), and focus on accretive with cross selling synergies. TRG initiated coverage on Acuren with the thesis of capitalizing on the multi-decade trend of renewed North America manufacturing from near- and re-shoring, and the acquisiton of NV5 furthers that thesis.