In a bold move to consolidate its position as a global leader in testing and inspection services, SGS has finalized the acquisition of Applied Technical Services (ATS) for $1.325 billion, a transaction that significantly deepens its footprint in North America’s high-margin NDT market.
The acquisition values ATS at 11.2x its projected 2026 EBITDA, and is immediately accretive to SGS’s earnings, while maintaining a prudent debt profile. More importantly, it positions SGS to dominate the specialized space of Non-Destructive Testing (NDT), calibration, and forensic services across critical sectors such as aerospace, defense, and energy.
With over 85 facilities and a team of 2,100 technical professionals, ATS brings unmatched expertise in niche inspection domains—ranging from weld testing and remote NDT to forensic analysis for insurance and litigation. These services are increasingly in demand as aging infrastructure and stringent regulatory mandates drive the need for advanced diagnostics and material testing.
“Today, we are a stronger company with the addition of Inspection Technologies,” said Rafael Santana, President and CEO of Wabtec. “The acquisition expands and strengthens our Digital Intelligence business, with advanced products and services for the Company’s rail, mining, and industrial sectors.”
Strategic Rationale: Anchoring SGS’s “Strategy 27”
The transaction elevates SGS’s North American revenues beyond $1.5 billion, accelerating its “Strategy 27” target of doubling regional sales by 2027. The integration of ATS provides not only scale, but access to a robust $2.14 billion order backlog, which has grown 19% year-over-year, underscoring resilient market demand.
ATS's industry-leading position in forensic NDT, a $1 billion segment with limited competition, provides SGS with a clear pathway into high-margin recurring revenues—a priority in its long-term value creation plan.
Financials and Synergies: A Justified Premium
While the purchase multiple initially raised investor eyebrows, factoring in $30 million in anticipated EBITDA synergies by 2026 brings the effective multiple to ~9.7x, well within sector norms.
- Margin Expansion: ATS currently operates at a 20.6% EBITDA margin, compared to SGS’s 24% average. Integration with SGS’s global network is expected to close this gap and drive margin accretion across the group.
- EPS Accretion: Post-synergy, ATS’s $125 million EBITDA contribution will account for approximately 4% of SGS’s baseline, supporting immediate earnings growth.
The deal is funded through a mix of cash, debt (keeping leverage at ~2x EBITDA), and $100 million in SGS equity, with a three-year lock-up, preserving capital structure flexibility amid a rising interest rate environment.
Execution Outlook: Low Risk, High Reward
SGS has mitigated integration risk by retaining ATS’s existing leadership—preserving continuity in its technical culture while aligning with SGS’s global strategic vision. Though ATS’s Q4 2025 net loss of $68.9 million, stemming from a $147 million revenue dispute with an EV client, raises red flags, it is viewed as an isolated incident rather than a systemic weakness.
Market Impact and Investor Outlook
The North American testing and inspection market is expected to grow at 6% CAGR through 2030, driven by infrastructure upgrades, ESG reporting, and tightening compliance standards. ATS’s deep domain expertise and facility network position SGS to lead the market’s digital and diagnostic transformation.
For shareholders, the acquisition checks key boxes: EPS accretion, synergy realization, margin expansion, and North American growth. The low-leverage financing structure and equity lock-up reduce near-term volatility, making SGS a buy or hold candidate, especially if shares dip post-announcement.
