MAXIMUS (MMS) Reports Acquisition of Veterans Evaluation Services Inc. for $1.4B

April 21, 2021 6:32 AM EDT

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Maximus (NYSE: MMS), a leading provider of government services worldwide, announced today that it signed an agreement to acquire the parent company of Veterans Evaluation Services, Inc. (VES) for a purchase price of $1.4 billion, subject to certain adjustments. Privately held VES serves the U.S. Federal Government and has established a strong reputation with the U.S. Department of Veterans Affairs as a leading provider of Medical Disability Examinations to determine Veterans’ eligibility for compensation and pension benefits. The proposed transaction is subject to U.S. antitrust filing requirements and customary closing conditions. The acquisition is expected to close in the Company’s third fiscal quarter.

The acquisition furthers a core element of Maximus' long-term corporate strategy to increase revenue attributable to providing independent and conflict free clinical business process outsourcing (BPO) services at scale. The acquisition also supports the Company’s ongoing strategic priority of expansion into the U.S. federal market. Further, the acquisition complements the previously announced Attain Federal combination by expanding the Company’s support of the U.S. Department of Veterans Affairs and creating new opportunities to apply digital solutions to improve citizen services.

“We welcome the employees of VES, who are leaders in serving the U.S. Department of Veterans Affairs and, together with Maximus, will continue to support our nation’s heroes, through programs and services targeted at addressing the personal, health, and employment needs of Veterans and their families,” commented Bruce Caswell, President and Chief Executive Officer of Maximus.

“We are pleased to enter into this transaction with Maximus, an organization that shares the unwavering commitment to Veterans that has always been the core of the VES mission,” said VES Founder George Turek. “We admire the Maximus organization’s high-quality reputation and track record of operating and managing large complex programs and performing mission critical functions for government agencies. Maximus brings additional resources, scale, and technology innovation that will position VES to provide enhanced service to our nation’s Veterans while maintaining industry-leading medical disability examination services.”

As a leading global provider of customer contact center operations, and case management services to governments and their citizens, Maximus also recognizes macro-trends driving demand for BPO services with a more clinically based dimension. The Company reported $535 million of revenue from assessments and appeals or 15% of total revenue in fiscal year 2020. With the addition of VES the portion of assessments and appeals revenue is expected to increase to approximately 25% of the Company’s total revenue on a pro-forma basis.

Caswell continued, “In May 2018, we established a goal to increase the portion of our revenue driven by value-add services led by credentialed health professionals and to demonstrate our ability to provide independent clinical BPO solutions at scale. The addition of VES to Maximus delivers on that commitment, and also enables us to pursue new opportunities with a wider set of federal and state customers seeking independent and conflict free clinically based services.”

The VES business will be part of the U.S. Federal Services Segment of Maximus and is expected to generate revenue of $160 million to $175 million for the last four months of fiscal 2021. This implies an annual run rate in the range of $480 million to $525 million. The impact to earnings is dependent on the valuation of acquired intangible assets and the resulting amortization. This valuation work is in process. Due to the nature of the acquired entity and underlying contract types, the addition of VES will blend up the Company’s average margin. The transaction will have one-time expenses, including financing charges, and ongoing interest charges. As a result, the transaction is expected to be slightly dilutive for the remainder of fiscal 2021 and should be accretive in future periods.

Outlook

Maximus will provide updates to guidance on the next earnings call which is planned for May 6, 2021. This is concurrent with the reporting of the Company’s results for the second quarter of fiscal 2021 ending March 31, 2021.



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