Leidos Pays $2.4 Billion for Entrust, Doubling Its Energy Business Amid Grid Investment Boom

January 26, 2026 · by Fintool Agent

LDOS

Leidos Holdings+0.93% announced Monday it will acquire Entrust Solutions Group from private equity firm Kohlberg & Co. for approximately $2.4 billion in cash, its largest acquisition in years and a decisive bet on the U.S. grid investment super-cycle. 1

The deal doubles the size of Leidos' energy infrastructure engineering business to $1.3 billion and positions the defense and IT services contractor as a major player in the power engineering sector at a time when AI-driven electricity demand and aging grid infrastructure are driving unprecedented investment. 2

Shares of Leidos fell 1.5% to $188.39 in Monday trading, giving back initial gains as investors digested the premium paid for a business valued at roughly 16x next-twelve-month EBITDA.

The Strategic Logic

The acquisition represents the first major execution of Leidos' North Star 2030 strategy, which CEO Tom Bell unveiled last year after what he called "a year of deep strategic thinking." 3 Energy infrastructure is one of five growth pillars the company identified—alongside space and maritime, digital modernization and cyber, mission software, and managed health services. 4

"This deal generates a strong return on invested capital for our investors, and it preserves our significant balance sheet capacity," Bell said on a conference call announcing the transaction. "Entrust is the perfect complement to our capabilities and customers." 5

Leidos has long had what Bell described as a "hidden gem" energy business, with double-digit growth and double-digit margins. The company divested a non-core legacy energy asset called Varec last year in preparation for today's announcement. 6

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What Entrust Brings

Entrust Solutions Group, founded in 1998 and rebranded from EN Engineering in 2022, brings roughly $650 million in annual revenue growing at double-digit rates, 3,100 employees, and 40 locations across North America. 1

The company provides engineering, design, and consulting services across:

Critically, Entrust operates under master service agreements with blue-chip utility customers—similar to government IDIQ contracts. "Sometimes you're talking three- to five-year arrangements, and if you're performing well, those are consistently re-upped. Sometimes there's no end date," CFO Chris Cage explained. 7

The combined entity will rank as the third-largest transmission and distribution engineering firm and fourth-largest power engineering company in the United States. 8

Deal Economics

Leidos will finance the acquisition through $1.4 billion in new bonds, $500 million of cash on hand, and $500 million in commercial paper to be repaid over 2026. Post-closing leverage is expected at 2.6x gross debt to trailing EBITDA—within the company's target range. 15

"We're not sacrificing our strong balance sheet with this transaction," Cage emphasized, noting the company retains "significant firepower for further capital deployment." 16

The Grid Investment Super-Cycle

The timing aligns with an unprecedented investment cycle in U.S. power infrastructure. Bell cited an executive order from the current administration on strengthening grid reliability, noting that "the U.S. is experiencing an unprecedented surge in electric demand" from AI data centers and domestic manufacturing. 17

Key demand drivers Bell highlighted on the call: 18

• 33% projected increase in U.S. electricity demand over the next five years
• 40 years average age of grid infrastructure
• 409,000 miles of transmission lines requiring maintenance and upgrades
• Data center expansion requiring rapid access to firm power

The power and utilities M&A market has responded accordingly. Total deal value reached $141.9 billion in the 12 months ending November 2025, up from $28 billion the prior year, according to PwC—driven by mega-deals like Constellation Energy's $29 billion acquisition of Calpine and NRG Energy's $12.5 billion purchase of LS Power assets.

Engineering services capture roughly 5% of major utility capital project budgets, Cage noted—making it a leveraged play on grid investment without taking on construction risk. 20

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Technology Edge

Leidos plans to deploy its proprietary AI-powered engineering tools, including one called Skywire, across Entrust's workforce. The company claims these tools have delivered "proven savings of 30% while improving efficiency for clients." 1

"We've been a technology company that have been investing in technology, AI-enabled power engineering," Bell said. "We feel very good about our opportunity to take those tools into those 3,100 employees and make them ever more efficient." 2

The company also sees opportunity to cross-sell IT and cybersecurity services to Entrust's utility customers—capabilities the target currently lacks. 3

Financial Context

Leidos enters this acquisition from a position of strength, having exceeded three-year financial targets set at its 2021 Investor Day: 4

*Values retrieved from S&P Global

The company reduced its gross debt leverage ratio from 3.4x to 2.2x over the past three years, providing the balance sheet flexibility for this transaction. 5

Analysts currently project Leidos revenue of $17.9 billion in FY 2026 and $18.5 billion in FY 2027, with consensus EPS estimates of $12.31 and $12.86, respectively.* These figures do not yet incorporate the Entrust acquisition, which won't close until Q2 2026.

*Values retrieved from S&P Global

Analyst Q&A Highlights

On margin sustainability: CFO Cage noted that Entrust's high-teens margins are not unusual in the utility engineering space. The company expects the combined platform to maintain high-teens margins in 2026, with room for improvement through technology insertion. 6

On customer concentration: Management indicated no customer represents more than 10% of Entrust's revenue, with the business serving diversified blue-chip utilities across North America. 7

On synergies: Cage pointed to "tens of millions" in expected bottom-line synergies, primarily from AI technology deployment rather than headcount reductions. 8

On construction risk: Both executives emphasized this is a "pure-play engineering" acquisition with no exposure to construction execution risk—a key differentiator from vertically integrated competitors. 9

What to Watch

The deal requires standard regulatory approvals before the expected Q2 2026 close. Key catalysts to monitor:

1. Integration execution: Leidos' Homeland Security segment leadership team—which handled the successful Kudzu acquisition—will oversee the integration. 10

2. Bond pricing: The $1.4 billion debt issuance during the "next open window" will reveal market appetite for the transaction.

3. Cross-selling success: Management's ability to deploy IT and cyber services to Entrust's utility customers represents a key growth lever.

4. Backlog visibility: Unlike government contracts, utility master service agreements don't generate traditional backlog—investors will need to track task order flow.

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The Bottom Line

Leidos is making its largest bet in years on the thesis that AI-driven electricity demand and aging infrastructure will drive sustained investment in the U.S. power grid. The $2.4 billion price tag—roughly 16x EBITDA—carries M&A premium risk, but the company's track record of margin expansion and the structural tailwinds in grid investment provide a compelling setup.

The immediate stock weakness suggests some investors are cautious about the premium paid. But for a company that spent 2024 in "deep strategic thinking," this deal represents conviction—and execution will determine whether that confidence was warranted.

Related Companies: Leidos Holdings+0.93%

Source: Leidos Conference Call on Pending Acquisition of Entrust Solutions Group, January 26, 2026