Serco agrees to buy QinetiQ's US defence business for USD 292m
The sale ends a strategic review that QinetiQ started in May and leads to a GBP 175 million writedown. Serco adds about 800 staff and space and surveillance capabilities in the US.
QinetiQ has agreed to sell its US business, QinetiQ Inc., to Serco for USD 292 million in cash, the two British companies announced on Thursday 12 November. The deal is on a cash free, debt free basis and concludes a strategic review of the US unit that QinetiQ launched in May 2026, according to QinetiQ's announcement.
Serco said the price, equal to about GBP 218 million, comprises around USD 237 million for the operating business and an acquired tax asset valued at USD 55 million, according to its stock exchange announcement. Completion is expected in the first quarter of 2027.
The seller: a sharper European focus
QinetiQ said the sale would make it a "stronger, focused, higher-quality company" concentrated on the UK, European NATO members and key allied defence and security markets. After completion, it plans to return GBP 200 million of the proceeds to shareholders by raising its share buybacks in the 2028 and 2029 financial years by GBP 100 million a year, and to invest more in digital and AI technology, infrastructure and its people.
Chief executive Steve Wadey said the US market had changed and the business lacked the scale to meet QinetiQ's growth and return targets, The Market Reporter reported. "The agreed US business sale sharpens QinetiQ's focus on the areas where we see the strongest opportunities for growth," he said.
QinetiQ Inc. generated revenue of USD 172 million and underlying operating profit of USD 13 million in the six months to 30 September 2026. The unit was carried at GBP 393 million on QinetiQ's balance sheet, so the group recognised a non cash impairment of about GBP 175 million in its interim results.
That writedown pushed QinetiQ to a statutory pre-tax loss of GBP 87 million for the half, against a profit of GBP 57 million a year earlier, according to The Market Reporter. Underlying operating profit rose 14% to GBP 110 million on revenue up 3% to GBP 923 million, the group kept its full year guidance, and it raised its interim dividend by 33% to 4 pence.
The buyer: scale in US defence
Serco said QinetiQ Inc. provides engineering, technology and mission support to the US defence and national security markets. Its work includes integrating satellite constellations for secure communications and missile tracking, operating airborne radar surveillance of US borders, and providing robotics and naval control systems. The deal brings about 800 staff and broadens Serco's work with the US Space Force, Army and Navy.
Serco expects the business to generate revenue of about USD 370 million and underlying operating profit of USD 21 million in 2027, with run rate cost synergies of at least USD 3 million by 2028. It puts the implied multiple at 9.9 times operating profit including synergies, excluding the tax asset, and expects the deal to add to earnings per share from 2028. The purchase will be funded from cash and committed debt facilities and will add about 0.6 times to leverage.
"Following completion, our North American revenue will approach USD 2.5bn, significantly strengthening our position in the world's largest defence market," Serco chief executive Anthony Kirby said. Completion needs US antitrust and foreign investment clearances, as well as approval of arrangements for the unit's classified work.
What it means for European founders and investors
The deal shows two different answers to the same defence boom. QinetiQ is retreating from a US market where it lacked scale to focus on the UK and Europe, where defence budgets are rising fast. Serco is doubling down on the US, where it already has a business of about USD 2 billion a year.
For European defence tech startups, QinetiQ's pivot is notable. A more focused UK group with more cash to invest in digital and AI technology in Europe could become a more active partner, customer or acquirer. The writedown is also a reminder that buying into US defence as a mid sized European company is hard, because classified work and security rules limit how closely a foreign parent can integrate its US unit.
For more on Europe's defence industry, see our reports on Germany's stake in KNDS and Rheinmetall's third quarter.
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