FA - Sterling Check Is An Attractive Merger Arbitrage

2024-03-19 15:14:33 ET

Summary

• Sterling Check is a digital identity services firm that specializes in background checks and employment verifications.
• The company has agreed to be acquired by First Advantage Corporation in a cash and shares deal.
• The deal is expected to close in the third quarter of 2024 and offers a potential 9.3% internal rate of return for investors.

Sterling Check ( STER ) is a firm focused on digital identity services, essentially background checks and other employment related verifications. The firm is almost certainly a beneficiary of technology over time, as the formerly variable costs of labor performing background checks can become fixed costs as those processes become more and more automated. That also improves the moat of the firm, as the costs to start-up a competitor become higher as they shift more to technology and less to labor....

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