Ricardo divests Ricardo Defense to focus on sustainability and energy transition

Ricardo Group plc, a global leader in strategic consulting and engineering, has completed the sale of Ricardo Defense Inc. to Proteus Enterprises LLC and Gladstone Investment Corporation through GPD Acquisition Inc. The deal, valued at $85 million (£67.5 million), marks a pivotal step in Ricardo’s strategic shift toward prioritising environmental and energy-transition solutions.

This divestment aligns with Ricardo’s commitment to becoming a world-leading consultancy in sustainability and energy management. The move also reflects the Group’s intention to reallocate resources and optimise its portfolio for long-term growth in high-margin, less capital-intensive sectors.

Why Ricardo Sold Its Defense Business

Ricardo Defense, based in Troy, Michigan, has been a significant contributor to Ricardo’s financial performance, accounting for 26% of revenue and 60% of operating profit in FY 2023/24. Specialising in engineering solutions for the U.S. Department of Defense, the business has delivered high-impact projects, including the ABS retrofit system for military vehicles.

Despite this success, Ricardo’s leadership identified an opportunity to refocus on its core expertise in environmental and energy-transition consulting. Graham Ritchie, CEO of Ricardo, explained that the decision to divest Ricardo Defense supports the Group’s transformation strategy and positions the business for sustainable growth under new ownership.

“This sale allows us to strengthen our focus on environmental and energy-transition solutions,” Ritchie noted, adding that Ricardo Defense will benefit from owners more aligned with its defence-focused goals.

Financial Strategy Behind the Sale

The transaction, executed on a cash-free, debt-free basis, provides Ricardo with a significant capital injection, which it plans to utilise for strategic investments. Notably, the proceeds will fund the acquisition of an 85% stake in E3 Advisory, a leading Australian infrastructure consultancy.

The simultaneous divestment of Ricardo Defense and acquisition of E3 Advisory illustrates Ricardo’s strategy to rebalance its portfolio. While the sale may have a near-term dilutive impact on earnings per share, the addition of E3 Advisory is expected to drive long-term revenue growth.

Ricardo’s financial strategy reflects its vision of aligning with global sustainability goals while reinforcing its expertise in consulting services that address the complexities of energy transition and environmental challenges.

How the Sale Supports Ricardo’s Long-Term Vision

Ricardo’s decision to divest Ricardo Defense aligns with its five-year strategy to pivot towards sectors with strong growth potential. As global sustainability agendas gain traction, Ricardo’s focus on energy-transition consulting and environmental services positions it as a key player in addressing these challenges.

The Group aims to leverage its interdisciplinary expertise across engineering, science, and economics to deliver integrated solutions for transport, energy, and environmental projects. This focus differentiates Ricardo in the consulting market and strengthens its competitive positioning.

In addition to simplifying its brand identity, Ricardo is accelerating its portfolio transition by prioritising investments in high-growth sectors. The acquisition of E3 Advisory is a crucial part of this strategy, enhancing Ricardo’s ability to tackle infrastructure challenges in markets undergoing rapid transformation.

What the Sale Means for Ricardo Defense

Under the new ownership of Proteus Enterprises and Gladstone Investment Corporation, Ricardo Defense is well-positioned for future growth. Christopher Lee, Senior Managing Director at Gladstone Investment, expressed optimism about the acquisition, citing Ricardo Defense’s established reputation and innovative solutions for the U.S. Department of Defense.

Gladstone Investment, known for its focus on lower middle-market businesses, expects Ricardo Defense to deliver both income and capital appreciation. The company’s leadership views this acquisition as a valuable addition to its portfolio of defence-focused assets.

A Strategic Shift Towards Sustainability

Ricardo’s divestment of its defence business underscores the Group’s commitment to evolving as a leader in sustainability consulting. By reallocating resources and focusing on energy-transition solutions, Ricardo is positioning itself to address the growing demand for innovative strategies that tackle environmental challenges.

This sale is not merely a financial manoeuvre but a strategic move to align Ricardo’s operations with its long-term vision of sustainable growth and value creation.