First Advantage Corporation, a leading provider of employment background screening, identity, and verification solutions, announced that it has entered into a definitive purchase agreement to acquire Sterling Check Corp., a provider of background screening and identity services. First Advantage will issue a combination of cash and stock valuing Sterling at approximately $2.2 billion, including Sterling’s outstanding debt.
First Advantage and Sterling offer complementary technology solutions and services that enable employers across healthcare, retail and e-commerce, transportation, manufacturing, financial services, and other industries to manage risk and hire the best talent. Customers will benefit from accelerated investment in innovation and access to a broader suite of products and solutions to meet their needs, fueling growth of the combined company.
Building on pro forma combined revenue of $1.5 billion for the year ended Dec. 31, 2023, the transaction is expected to deliver at least $50 million in run-rate synergies, implying immediate double-digit EPS accretion on a run-rate synergy basis. The combined company will have greater diversification of revenue across customer segments, industries, and geographies, reducing seasonality and improving resource planning and operational efficiency.
Following the transaction, First Advantage is expected to continue compounding EPS at a teens growth rate over time through a combination of topline growth, ongoing synergy capture, and significant deleveraging via strong organic free cash flow generation. First Advantage will share additional forward-looking financial information regarding the transaction’s impact at or around the time of closing.
“We are thrilled to announce the acquisition of Sterling, demonstrating our commitment to delivering high-quality, cost-effective employment background screening and identity verification solutions that enhance value for customers by helping them hire smarter and onboard faster, while also positioning First Advantage for long-term value creation,” says Scott Staples, CEO of First Advantage. “This combination unlocks efficiencies and opportunities to fuel incremental growth and invest in new technology solutions, including AI-driven automation, while further diversifying our business for greater resilience. We look forward to welcoming Sterling’s talented employees to First Advantage and implementing best practices from both organizations to better address the needs of applicants and employers of all sizes and across all verticals.”
“We are exciting to be combining with First Advantage to accelerate Sterling’s strategic goals and deliver added value for our company, shareholders, clients, and employees,” says Josh Peirez, CEO of Sterling. “We look forward to offering clients a broader suite of solutions, while maintaining the excellent service they have come to expect. Importantly, this transaction delivers immediate value to Sterling shareholders, as well as the opportunity to participate in the compelling, long-term upside potential of a combined company that is positioned better than ever to serve the dynamic needs of our customers.”
Certain entities advised by or affiliated with Goldman Sachs & Co., LLC., which own approximately 52.8% of Sterling’s outstanding shares, entered into a support agreement pursuant to which they have delivered a written consent approving the transaction. CDPQ is an investor in one of these entities.
Following the closing of the transaction, Staples will continue to service as CEO of First Advantage. Peirez, Sterling’s CEO, will be offered a seat on the First Advantage Board of Directors. First Advantage will continue to be headquartered in Atlanta, Georgia.
