Page 74 - FCW, March/April 2018

M&A Report
Best intelligence- related deal
Buyer: KeyW Corp.
Acquisition: Sotera Defense Solutions Value: $235 million
Why: With this deal, KeyW doubled its size and made the company the larg- est publicly traded rm focused solely on the intelligence community. Sotera brought KeyW access to several large inde nite-delivery, inde nite-quantity contracts just as government buyers increasingly turn to those vehicles for their buying needs. Sotera added 1,100 employees to the 1,000 KeyW already had. In total, 80 percent hold security clearances.
The increase in size and new contract vehicles are allowing KeyW to pursue contracts that were previously out of reach.
Best divestiture
Seller: Harris Corp. Buyer: Veritas Capital Business: Harris IT Value: $690 million
Why: Harris wanted to jettison its
IT business so it could focus on its electronics and platform-centric work; Veritas Capital was happy to oblige. For $690 million, Veritas picked up about $1 billion in annual revenue. Within a few months, it installed Stu Shea as CEO, and Harris IT adopted the name Peraton. Shea has been building a management team and creating a distinct culture, and Peraton has already been winning con- tracts, including a $578 million logistics deal with the Transportation Security Administration.
Best private equity deal
Buyer: Arlington Capital Partners Acquisition: Xebec
Value: Not disclosed
Why: Private equity rm Arlington Capi- tal has created another platform in the government market by buying Xebec, which has roots in the intelligence community. As 2018 got underway, Arlington Capital acquired Integrity
Applications Inc. and plans to merge it with Xebec. IAI also focuses on the intel- ligence community and has capabilities in human intelligence and IT services. The pattern is a familiar one for Arling- ton Capital: Another platform, Polaris Alpha, continues to make deals in the federal market.
Honorable mention: Private equity rm H.I.G.’s acquisitions of NCI and Whitney, Bradley and Brown.
Market newcomer
Buyer: Belcan
Acquisitions: Kemtah Group and
Schafer Corp.
Value: Not disclosed
Why: Cincinnati-based engineering rm Belcan was founded in 1958 but didn’t join the government market until 2016, when it acquired Intercom Consulting and Federal Systems Corp. In 2017, it followed those deals with two more — Kemtah Group and Schafer Corp. After closing those deals, Belcan — which itself was acquired by private equity rm AE Industrial Partners in 2015 —
created a government segment. The rm’s leaders say more deals are on the way.
Best of the rest
ManTech International acquired InfoZen for $180 million, adding IT modernization skills and broadening its customer base.
ECS Federal bought InfoReliance for an undisclosed amount. The deal gives ECS more solutions capabilities in the areas of cloud and cybersecurity and boosts the company above $500 million in annual revenue.
Salient CRGT acquired Information Innovators for an undisclosed amount. The acquisition brings health care cli- ents at the Department of Health and Human Services, the Food and Drug Administration, the Defense Health Agency and the Department of Veterans Affairs. Salient CRGT also added $200 million in revenue, pushing its total above $500 million and pushing the company solidly into the middle tier of government contractors.
The outlook for 2018
Merger and acquisition activity in the government market never stops. So while looking back at the deals that closed in 2017, it also is important to consider what the year ahead will bring.
In 2018, that outlook is particularly noteworthy because two of our top dealmakers in 2017 are already acqui- sition targets.
• ECS Federal is being acquired by staf ng services rm On Assignment for $775 million.That deal is expected to close by April 2, and the current management team led by CEO George Wilson will stay in place. “Same strat- egy, same management team, more resources,” he said.
• General Dynamics is buying CSRA for $6.8 billion in cash and the
assumption of $1.8 billion in debt.The deal, which is expected to close by the end of June, will create a business with $9.9 billion in annual IT revenue.
• In May, a complex three-way deal will merge the public-sector business of DXC Technology with Vencore and KeyPoint Government Solu- tions.This will create a new publicly traded company with about $4.3 billion in annual revenue.
Those acquisitions will create new, potentially dominant players in the market and are early candidates for the top deals of 2018. But if 2017, with its 102 deals, is any indication, these three will be far from the only ones in the government space that will reshape the competitive landscape.
— Nick Wakeman
70 March/April 2018 FCW.COM