Acquisitions

12 Months Ended

Sep. 27, 2024

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]

Acquisition of CMS

On September 27, 2024, Amentum Parent Holdings LLC completed its merger with CMS in a Reverse Morris Trust transaction. Amentum Parent Holdings LLC is the accounting acquirer of CMS. Immediately following the Transaction, the Company has 243 million issued and outstanding shares of common stock, of which Jacobs and its shareholders owned 58.5% of the issued and outstanding shares of common stock, and Amentum Equityholder owned 37.0%. Further, 4.5% of the issued and outstanding shares of common stock have been placed in escrow, to be released and delivered in the future to Jacobs and its shareholders or to Amentum Equityholder, depending on the achievement of certain fiscal year 2024 targets by the CMS Business (“Additional Merger Consideration”). The final determination of this Additional Merger Consideration is expected to be completed during the measurement period.

CMS is a leading provider of mission-critical, technology-driven services in government and commercial markets. The CMS Business provides test, training and operations services for missile defense systems; IT and engineering services to defense clients and the Space sector; technological solutions including installations, decommissioning, and environmental remediation to energy clients; other highly technical consulting solutions; advanced cyber training and data analytics for government professionals; advanced communication systems and aerial mapping technologies to national security clients and other technical

services for United States defense and intelligence clients. As a result of the Transaction, the Company will be a leading government services provider to the U.S. federal government and its allies.

Under the acquisition method of accounting, total preliminary consideration exchanged for the CMS transaction was:


(In millions, except per share amounts)	September 27, 2024
Shares of Amentum Holdings, Inc. common stock issued to CMS shareholders	142
Per share price of Amentum Holdings, Inc. common stock	25.67
Fair value of common stock issued to CMS shareholders1	3,654
Fair value of additional equity consideration issued to CMS shareholders2	281
Other consideration3	6
Fair value of consideration transferred	3,941
Fair value of previously held equity interest4	84
Total consideration	$	4,025

(1) Represents the fair value of consideration received by Jacobs shareholders to provide 58.5% ownership in the Company.

(2) Represents the Additional Equity Consideration which is subject to the finalization of target operating profit metrics by CMS for the year ended September 27, 2024.

(3) Represents other immaterial adjustments, including a) estimated equity consideration related to pre-combination share-based compensation awards, b) the settlement of CMS transaction costs paid by Amentum, and c) the removal of consideration related to the acquisition of non-controlling interests.

(4) Prior to the Transaction, we held a non-controlling interest in a joint venture of 50% which was accounted for under the equity method of accounting, with the remaining 40% held by the CMS Business and 10% held by an unrelated third party. As a result of the Transaction, the Company gained a controlling financial interest in the joint venture and it became a consolidated joint venture of the Company. This joint venture acquisition was accounted for as a business combination achieved in stages. Our pre-existing equity method investment in the joint venture was remeasured at an acquisition date fair value of $170 million by using a discounted cash flow model based on estimated future revenues, margins and discount rates, among other variables and estimates. The Company’s previously held equity interest in the joint venture was remeasured to fair value, resulting in a gain of $69 million, which is included in gain on acquisition of controlling interest in our consolidated statements of operations. Additionally, as of the acquisition date, the Company had a payable from the joint venture with a fair value of $1 million that was settled in connection with the acquisition.

The Company recognized $79 million of transaction costs for the year ended September 27, 2024, of which $31 million relates to debt issuance costs that were incurred immediately following the transaction and are expensed and presented in loss on extinguishment of debt in the consolidated statements of operations. The remaining $48 million of transaction costs are presented within selling, general, and administrative expenses in the consolidated statements of operations.

The Transaction was accounted for as a business combination. The Company assessed the fair value of the identifiable intangible assets including customer relationships and backlog, which were valued using the excess earnings method of the income approach. This method requires several judgments and assumptions to determine the fair value of the intangible assets including expected future cash flows, weighted-average cost of capital, discount rates, useful lives of assets and expected long-term growth rates. The goodwill recognized was attributable to the synergies expected to be achieved by combining the businesses of Amentum and CMS, expected future contracts and the acquired workforce. The goodwill is partially deductible for tax purposes.

The purchase price was allocated, on a preliminary basis, to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, with the excess purchase consideration recorded as goodwill. The Company is still evaluating the determination of fair values allocated to various assets and liabilities, including, but not limited to, intangible assets, accounts receivable, other current assets, property and equipment, equity method investments and joint ventures, other long-term assets, income taxes, deferred taxes, accounts payables, other current liabilities, contract liabilities, other long-term liabilities, non-controlling interests, additional merger consideration and goodwill. The allocation of the purchase price is preliminary and subject to change as the Company continues to obtain and assess relevant information that existed as of the acquisition date, including but not limited to, information pertaining to CMS’ legal proceedings, reserves, income taxes, contracts with customers, and pre-acquisition contingencies. Additionally, in connection and in accordance with the terms of the spin-off, prior to the spin-off and Transaction, CMS provided a cash payment to Jacobs of approximately $911 million, after adjustments based on the levels of cash, debt and working capital in the CMS Business, which is subject to final settlement between the parties, as set forth in the Merger Agreement, and may result in changes to the purchase price allocation. The Company expects to have sufficient information available to resolve these items within one year of the CMS acquisition date. The preliminary allocation of the purchase price is as follows:


(Amounts in millions)	Preliminary Allocation of Purchase Price
Cash and cash equivalents	$	488
Accounts receivable	1,043
Prepaid expenses and other current assets	82
Property and equipment	72

Equity method investments	17
Goodwill	2,665
Intangible assets	1,860
Other long-term assets	107
Current portion of long-term debt	(8)
Accounts payable	(257)
Accrued compensation and benefits	(285)
Contract liabilities	(48)
Other current liabilities	(98)

Long-term debt, net of current portion	(1,122)

Deferred tax liabilities	(353)
Other long-term liabilities	(75)
Non-controlling interests	(63)
Total consideration	$	4,025

The estimated fair value of acquired backlog of $270 million is amortized on an accelerated basis over approximately 1 year and the estimated fair value of customer relationship intangible assets of $1,590 million is amortized on an accelerated basis over approximately 14 years. The fair value attributed to these intangible assets acquired was based on assumptions and other information compiled by management, including independent valuations that utilized established valuation techniques, and thus represents a Level 3 fair value measurement. The income approach was primarily used to value the intangible assets, consisting primarily of acquired program and contract intangibles and backlog. The income approach indicates value for an asset based on the present value of cash flow projected to be generated by the asset. Projected cash flow is discounted at a rate of return that reflects the relative risk of achieving the cash flow and the time value of money.

Pro Forma Combined Financial Information

The following unaudited pro forma financial information presents the combined results of operations for CMS and the Company for the pre-acquisition periods of the twelve months ended September 27, 2024 and September 29, 2023, respectively:


	For the years ended
(Amounts in millions)	September 27, 2024		September 29, 2023
Revenues	$	13,858	$	13,371
Net income (loss) attributable to common shareholders	145		(170)

The unaudited pro forma combined financial information presented above has been prepared from historical financial statements that have been adjusted to give effect to the Transaction as though it had occurred on October 1, 2022. The unaudited pro forma combined financial information includes adjustments for intangible asset amortization, stock-based compensation, interest expense, policy adjustments, and other transaction costs. The unaudited pro forma financial information is not intended to reflect the actual results of operations that would have occurred if the acquisition had occurred on October 1, 2022 nor is it indicative of future operating results.