First Advantage (FA.US) acquires rival Sterling Check (STER.US) in a $2.2 billion deal.

Leading provider of background screening, identity recognition, and verification solutions, First Advantage (FA.US), has agreed to acquire competitor Sterling Check (STER.US) in a cash and stock transaction, including debt, valuing Sterling Check at approximately $2.2 billion. Following the announcement, Sterling Check's stock price rose over 26% in pre-market trading, while First Advantage fell nearly 13%. Under the terms of the deal, Sterling Check shareholders will have the option to exchange each Sterling share for $16.73 in cash or 0.979 shares of First Advantage common stock. The shareholder elections will be prorated, with approximately 72% of Sterling shares exchanged for cash consideration and 28% exchanged for First Advantage common stock. Based on estimated combined annual revenues of $1.5 billion as of December 31, 2023, the transaction is expected to generate at least $50 million in operational synergies, meaning double-digit earnings growth will be realized immediately on the basis of operational synergies. Following the completion of the transaction, First Advantage expects to continue achieving earnings growth at a compound rate of 10%-19% through revenue growth, sustained synergies, and significant deleveraging generated by strong organic free cash flow. Scott Staples will continue to serve as CEO of First Advantage. Sterling's CEO, Josh Peirez, will gain a seat on the board of directors of First Advantage. The headquarters of First Advantage will remain in Atlanta, Georgia.