Jacobs Acquires TechTeam Subsidiary - Analyst Blog

Jacobs Engineering Group Inc. (JEC) acquired the TechTeam Government Solutions Inc., a government solutions subsidiary of TechTeam Global Inc. (TEAM) for $43.0 million.

Acquisitions are a key to Jacobs’ growth. The company has a successful record of having executed over 30 acquisitions over the last 20 years. The Babtie acquisition (completed in August 2004) has provided many opportunities to Jacobs, including further expansion into the U.K. market, organic infrastructure growth opportunities and entry into the rapidly-growing markets of Ireland and Eastern Europe.

Jacobs acquired a 60% interest in Zamel & Turbag Consulting Engineers (Zate) in March 2008 in order to expand its business in the Middle East. In fiscal 2010, Jacobs acquired Jordan, Jones and Goulding Inc., a professional services firm, in order to expand into water and wastewater market. Jacobs’ ongoing acquisition strategy will help it to strengthen its position in the coming years.

Further, Jacobs’ diversification across markets, geographical regions and services will help it to generate growth in the sluggish environment. The company also plans to expand into the emerging markets such as India, China and the Middle East. Emerging markets are expected to perform much better than the developed markets in the coming years.

However, Jacobs’ business is cyclical in nature due to a wide variety of uncontrollable factors, including economic conditions and changes in client spending, particularly during periods of economic uncertainty. However, the market is recovering gradually, which is expected to push Jacobs ahead in the future.

Thus, we reiterate our long-term Neutral recommendation on the stock. Currently, the stock retains its Zacks #3 Rank (short-term “Hold” rating).