Beruflich Dokumente
Kultur Dokumente
Year End
Newsletter
Featuring:
2010 Government Services M&A Recap
2011 Government Services M&A Outlook
2010 Public Company Performance
IPO Markets Thaw
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© 2011 Aronson Capital Partners. All rights reserved. This is a confidential document. Securities transactions are executed by Aronson Capital Advisors, LLC (member FINRA-SIPC)
YEAR END NEWSLETTER 1
M &A activity in the government services sector rebounded to have a strong year in 2010 following the 2009 lull. With
98 deals closed or announced, 2010 deal volume was up 46% over 2009, returning to pre-recession levels. The increase
was primarily driven by shifting federal spending priorities and threatened expiration of the Bush tax cuts, which were ultimately
extended through 2012. The M&A markets also benefited from a recovering economy and improved financing terms.
100
While deal volume on the whole is on the rise, we saw the hot areas of interest narrow 80
Deal Value
significantly throughout 2010. Niche, high-end cyber security and intelligence-
60 107
focused companies accounted for the majority of 2010 M&A activity and commanded 93 98
40 81
premium valuations compared to their generalist information technology and 67
20
professional services counterparts. The hottest segments in 2010 were Cyber Security,
Intel/C4ISR and OCI–driven divestitures. 0
2006 2007 2008 2009 2010
© 2011 Aronson Capital Partners. All rights reserved. This is a confidential document. Securities transactions are executed by Aronson Capital Advisors, LLC (member FINRA-SIPC)
YEAR END NEWSLETTER 2
© 2011 Aronson Capital Partners. All rights reserved. This is a confidential document. Securities transactions are executed by Aronson Capital Advisors, LLC (member FINRA-SIPC)
YEAR END NEWSLETTER 3
D espite federal budget pressures, increased competition, protests and delayed procurements, and rumors of insourcing, M&A
activity in 2011 will be fueled by strategic buyers’ interests in realigning their portfolios with long–term spending priorities.
Strategic buyers, faced with lower organic growth rates, continue to analyze their portfolios and acquire firms that fill capability
gaps to position them in high priority markets that create additional financial growth in profitable areas. Therefore, we expect 2011
government services deal volumes to be consistent with 2010 – and the following sectors will experience the lion’s share of this
activity in 2011:
VIRTUALIZATION/CLOUD COMPUTING
Cloud computing is fundamental to the Obama Administra-
tion’s technology strategy – requiring more efficiency out of
IT as a whole – by expanding usability and accessibility while
reducing costs. Consistent with OMB’s 25 Point Plan, agen-
cies will be implementing a “Cloud First” policy, requiring a
significant amount of contractor support in the near term.
© 2011 Aronson Capital Partners. All rights reserved. This is a confidential document. Securities transactions are executed by Aronson Capital Advisors, LLC (member FINRA-SIPC)
YEAR END NEWSLETTER 4
115 • Currently evaluating strategic alternatives for $6B shipbuilding segment, which has
12.78% historically constrained margins
110
105
85 • Disavowed 6-9% long term growth goals due to federal budget uncertainty
Northrop Grumman Corp. $65.15 $19,023 $21,009 $35,075 $3,732 10.6% 5.6 x 0.6 x
Raytheon Co. $46.09 $16,802 $17,565 $24,965 $3,021 12.1% 5.8 x 0.7 x
SAIC, Inc. $16.04 $5,967 $6,234 $11,031 $1,052 9.5% 5.9 x 0.6 x
© 2011 Aronson Capital Partners. All rights reserved. This is a confidential document. Securities transactions are executed by Aronson Capital Advisors, LLC (member FINRA-SIPC)
YEAR END NEWSLETTER 5
• Positive outlook for intelligence agency • Sensor Technologies, Inc. acquired in January for $242 million in order to broaden
C4ISR capabilities and reach deeper into the high-end intelligence and defense
support ($80B market) modernization,
market; additional acquisitions include QinetiQ’s S&IS segment and MTCSC Inc.
logistics systems, and cyber security
• Profitability declines attributed to a more competitive environment and the impact
of the STI acquisition
120
115
12.78% NCI, Inc. (NASDAQ:NCIT) $23.40 6 15.4%
110 • NCI announced its plans in May to increase its internal investment and resources
8.01%
105 to fund long-term growth; these investments will cause a short-term decline in
100 profitability, causing NCI to reduce EPS guidance
95 • Lower margin BRAC work is also negatively impacting overall margins
90
• Judith Bjornaas resigned as CFO in December to accept an SVP position with
85 ManTech
80
Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 • Raised $200 million of public debt to fund working capital and strategic
acquisitions necessary to reach management’s stated goal of $1 billion in revenue
Mid-Tier Index: CACI, DRCO, GTEC, ICFI, MANT, NCIT, SRX
in the next three to five years
NCI, Inc. $23.40 $317 $351 $535 $42 7.8% 8.5 x 0.7 x
SRA International, Inc. $21.61 $1,234 $1,144 $1,673 $149 8.9% 7.7 x 0.7 x
© 2011 Aronson Capital Partners. All rights reserved. This is a confidential document. Securities transactions are executed by Aronson Capital Advisors, LLC (member FINRA-SIPC)
YEAR END NEWSLETTER 6
S
imilar to M&A activity, government services industry IPOs also accelerated in 2010. A year after Global Defense Technology &
Systems, Inc. (GTEC) tested the IPO waters, Booz Allen Hamilton Holding Corp (Booz) & KEYW Holding Corp (KEYW)
followed with successful offerings. This was the first time that multiple government services companies went public in the same year
since 2006 (SAIC & DynCorp) – a feat we expect will be repeated in coming years as the public markets continue to stabilize.
Though the companies share some similarities, a comparison of the KEYW & Booz IPO’s provides insightful analysis on current
government services valuation dynamics. Compared to Booz, KEYW achieved a significantly higher IPO valuation due to the
Company’s niche cyber security capabilities, IC-focused customer set, rapid revenue growth and expanding profitability outlook.
The exhibit below provides a comparison:
Background: Founded by Len Moodispaw in August Background: Founded by Edwin Booz in 1914, the
2008, formerly of Essex Corp. KEYW has since public sector portion of the company was acquired in
completed nine acquisitions. The company went public 2008 through a leveraged buyout by the Carlyle Group
on 10/1/2010 and is using the IPO proceeds to pay off for over $2.5B. Booz went public on 11/17/2010, using
existing debt and to fund additional acquisitions. the proceeds to pay off existing debt.
Primary Customers: Specific focus on the NSA, other Primary Customers: Broad customer base across the
IC agencies, and the DoD DoD, IC, and Federal Civilian agencies
Core Capabilities: Mission critical cyber security and Core Capabilities: Broad base of management and
cyber superiority solutions and products that support technology consulting services, including strategy and
the collection, processing, analysis and use of process improvement, business analytics, cyber technol-
intelligence data and information in cyber space ogies, systems engineering and integration, and acquisi-
tion and program management
1
IPO metrics are calculated by ACP as of the respective IPO offering date based on information included in the prospectus.
© 2011 Aronson Capital Partners. All rights reserved. This is a confidential document. Securities transactions are executed by Aronson Capital Advisors, LLC (member FINRA-SIPC)
YEAR END NEWSLETTER 7
© 2011 Aronson Capital Partners. All rights reserved. This is a confidential document. Securities transactions are executed by Aronson Capital Advisors, LLC (member FINRA-SIPC)
YEAR END NEWSLETTER | ACP OVERVIEW 8
n
Phil McMann Phil has extensive M&A experience in the federal sector, particularly in the Intelligence and Defense markets. He has
301.231. 6202 completed notable transactions including: Zytel, Seismic, DDK, i2S, RavenWing, AEPCO, and TMS. Prior to joining
pmcmann@aronsoncapitalpartners.com ACP, Phil was a finance executive at a NY-based private equity fund.
n John Saunders John has completed over 50 M&A transactions with aggregate deal value in excess of $2.5B. John has also raised over
301.231. 6209 $1B in equity and debt capital in public and private transactions. He has 15 years executive experience with a $2B federal
jsaunders@aronsoncapitalpartners.com contractor.
facts about a CP :
n Established in 1999, with over n Focused exclusively on the government services and technology sector
40 completed transactions n 90%+ success rate
n
Completed 10 transactions n Principals have closed nearly 100 transactions worth more than $3.5B
in the past two years in aggregate value
capabilities:
Aronson Capital Partners is a full service investment bank providing mergers & acquisitions, corporate finance, and financial
advisory services. We complete a variety of transactions that are tailored to shareholder objectives, including sell- and buy-side M&A,
management buyouts, ESOPs, and recapitalizations. Our principals leverage their close relationships with a wide array of key decision
makers of strategic buyers, private equity firms, and middle-market lenders to complete transactions. These relationships provide
options and flexibility for our clients.
© 2011 Aronson Capital Partners. All rights reserved. This is a confidential document. Securities transactions are executed by Aronson Capital Advisors, LLC (member FINRA-SIPC)
YEAR END NEWSLETTER | TRANSACTIONS 9
Recent Transactions
April 28, 2010
has acquired
June 6, 2008
February 27, 2009
Confidential
Seller has completed a recapitalization transaction
and acquired certain holdings of
© 2011 Aronson Capital Partners. All rights reserved. This is a confidential document. Securities transactions are executed by Aronson Capital Advisors, LLC (member FINRA-SIPC)