ATLANTA - First Advantage Corporation (NASDAQ:FA), a global leader in employment background screening, identity, and verification solutions, has completed the acquisition of Sterling Check Corp. The deal, valued at $2.2 billion including Sterling's outstanding debt, was finalized to enhance customer experiences and expand the company's services across various industries and regions.
The acquisition unites the complementary technology platforms of both companies, aiming to provide high-quality, cost-effective solutions for customers. Scott Staples, CEO of First Advantage, expressed enthusiasm about integrating Sterling's team and their shared commitment to customer service, adding that the merger will bolster the company's value proposition.
According to Staples, the integration will focus on delivering exceptional service and investing in innovative technologies, such as AI-driven automation. The combined efforts are expected to yield between $50 million and $70 million in run-rate synergies and offer double-digit EPS accretion on a run-rate synergy basis.
The transaction is anticipated to diversify First Advantage's revenue across customer segments and geographies, reducing seasonality and improving operational efficiency. The combined company projects pro forma combined revenue of approximately $1.5 billion.
First Advantage will provide further details about the acquisition and its future strategy during its third quarter 2024 earnings call on November 12, 2024.
J.P. Morgan Securities LLC and several other financial institutions served as advisors to First Advantage, while Goldman Sachs & Co. LLC and Citi advised Sterling. Legal counsel was provided by Simpson Thacher & Bartlett LLP for First Advantage and Fried, Frank, Harris, Shriver & Jacobson LLP for Sterling.
This news is based on a press release statement, and interested parties can find additional information regarding the transaction on First Advantage's website.
In other recent news, First Advantage Corporation is moving closer to finalizing its merger with Sterling Check Corp, a significant development anticipated to conclude by the end of this year. Regulatory review periods have expired and the merger is now subject to the satisfaction of the remaining customary closing conditions. Joelle Smith has been promoted to the position of President at First Advantage, bringing her instrumental leadership to oversee the product, data, and technology divisions, as well as the go-to-market teams. Wolfe Research, however, recently downgraded First Advantage's stock rating from "Outperform" to "Peer Perform," primarily due to valuation metrics, but maintains a positive outlook on the company's strategic moves. This includes the planned acquisition of Sterling Check Corp, which, once completed, will make Sterling a wholly-owned subsidiary of First Advantage. These are among the recent developments impacting First Advantage.
InvestingPro Insights
As First Advantage Corporation (NASDAQ:FA) completes its acquisition of Sterling Check Corp, investors may find value in examining some key financial metrics and insights provided by InvestingPro.
According to InvestingPro data, First Advantage boasts a market capitalization of $2.72 billion, reflecting its significant presence in the employment screening and verification industry. The company's impressive gross profit margin of 49.5% for the last twelve months as of Q2 2024 aligns with one of the InvestingPro Tips, which highlights the company's "impressive gross profit margins." This strong profitability metric suggests that First Advantage has been effective in managing its costs, which could be beneficial as it integrates Sterling's operations.
Another relevant InvestingPro Tip indicates that First Advantage "operates with a moderate level of debt." This financial stability could prove advantageous as the company navigates the complexities of the $2.2 billion acquisition, including Sterling's outstanding debt.
It's worth noting that First Advantage's P/E ratio stands at 104.53, which the InvestingPro Tips characterize as "trading at a high earnings multiple." This valuation metric may reflect market expectations for future growth, particularly in light of the recent acquisition and projected synergies.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights beyond those mentioned here. In fact, there are 7 more InvestingPro Tips available for First Advantage, providing a deeper understanding of the company's financial health and market position.
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