Boston
Washington
Huntsville
Patuxent River
Dayton
Colorado Springs

Volume 4, Issue 5 December 2006
$Account.OrganizationName

Welcome to the Federal Growth Report, the newsletter published by Minuteman Ventures LLC, an investment bank that focuses on mergers and acquisitions.

Our newsletter addresses issues of importance to leaders in the federal contracting sector. These people build companies and increase equity value.

Regards,

Paul Serotkin
President
Minuteman Ventures LLC


Archives

October 2006
August 2006
June 2006



Join our mailing list!
 
In This Issue
 
CEO Interview - Joe Kampf, Chairman and CEO, CoVant Management (and former Anteon CEO)
The Federal Deal - Textron Acquires Overwatch Systems
Daily Deals - Check out the latest sector M&A deals

Minuteman Ventures LLC partners with InfoBase Publishers, Inc., to bring you expert analysis of recent federal M&A transactions. InfoBase is a provider of information on buyers and sellers in the global defense, aerospace, and government technology marketplaces. Their Defense Mergers and Acquisitions (DM&A) module is the most comprehensive collection of industry M&A data and analysis in existence.

InfoBase is a lot more than M&A. Their on-line service links the defense sector's latest news on companies, contracts and programs to insightful sector analysis, budget trends and M&A transactions. For more on InfoBase Publishers and its web-based Defense/Aerospace Competitive Intelligence Service (DACIS), visit www.dacis.com or contact Bill Burton (wkburton@dacis.com) (410.820.6821) for a personal tour.


The Minuteman Federal Deal Meter
  Purchase price  
  Under $50m $50–100m Over $100m Total Deals
YTD 2005 53 8 12 73
YTD 2006 52 12 12 76

The Minuteman Federal Deal Meter covers M&A transactions of services firms principally serving federal agencies. Transactions covered are those announced from January 1 through December 11 of the respective years.

For the list of M&A transactions closed in the sector since January 1, 2005, email paulserotkin@minutemanventures.com.


Minuteman Ventures LLC advises company owners on the sale of their businesses, and assists corporate and private equity buyers in strategic acquisitions and divestitures. Our team consists of experienced entrepreneurs and business executives who founded or operated companies and corporate divisions.

We specialize in companies that sell services, products, and solutions to federal government clients. We pride ourselves in being the investment bank for entrepreneurial companies in the federal sector.


CEO Interview

Joe Kampf, dealmaker extraordinaire who made his mark as CEO of Anteon International, is back on the startup trail.

Kampf, who headed Anteon during its run from $100 million in 1996 (after acquiring Ogden Professional Services) until its sale this year to General Dynamics (NYSE:GD) at a $1.7 billion run rate, is trying to engineer another entrepreneurial success.

Kampf and six of his former Anteon colleagues just set up shop as CoVant Management, Inc., a private equity fund designed to grow in federal markets, or outside of them as the opportunity arises.

For our full interview with Kampf, click here.

^ back to top


The Federal Deal

FGR offers analysis of M&A transactions involving government services contractors. The analysis is written by Stuart McCutchan, president and CEO of InfoBase Publishers, Inc. © and editor of the Defense Mergers & Acquisitions, a premier source for information on defense/aerospace M&A. Opinions expressed below are those of InfoBase. All rights reserved. For more on InfoBase Publishers' services, contact Bill Burton (410-820-6821, wkburton@dacis.com).


Textron Acquires Overwatch Systems

It's been half a century since the Pentagon's requirement to direct its combat forces first began to be addressed with a double-barreled acronym: command and control (C2). Then came revolutions in the fields of telecommunications and computing which allowed the Pentagon to set its sights higher, tacking on two more "C"s to the acronym (for "communications" and "computers") and an "I" (for "intelligence", the ineffable human quality which animates all that technology).

Then, in the early 1990s, came the first Gulf War. The frustrating hunt for Saddam's Scud launchers highlit the shortfalls in C4I, and before the decade was out, the verdict was in: it wasn't enough to command, control, or communicate with your assets — not even with computers, not even guided by intelligence. No, unless you had Surveillance and Reconnaissance feeding into the system, C4I might just as well be dropped in favor of "GIGO" (for garbage-in, garbage-out).

Thus did the current C4ISR acronym come into being, a ponderous accretion of half a century's worth of change in technology and military doctrine. Somewhere in all those letters and numbers a simple idea got lost: that a military force needs to hurt the enemy more than he can hurt you, using technology as a force multiplier. That's the idea behind the Pentagon's newest double-barreled catch phrase: the sensor-to-shooter chain (a coinage so simple that as yet the Dept. of Defense has felt no need to tag it with an acronym).

It's the people who understand the sensor-to-shooter chain, and have a strategic sense of how to package and sell that knowledge to the Pentagon, who have realized some of the richest returns in recent memory for the defense industry. And few people exemplify the gold-rush quality of the marketplace like William R. Craven, the man who in three-and-a-half short years took Overwatch Systems from acquisitions vehicle to acquisitions magnet.

A short look at Mr. Craven's eventful career helps set the stage for understanding this deal. He was hired into the defense industry in the mid-1990s to lead Paravant, Inc., a provider of digital battlefield equipment to the U.S. Army and Air Force and high-speed signal intelligence processing systems to U.S. intelligence agencies. He engineered a successful IPO in 1996 and then a series of four acquisitions of defense and intelligence companies. In 2002 Paravant was sold to DRS Technologies for $110 million — more than twice its revenues of $52 million.

It was a strong performance, but Mr. Craven was just getting warmed up. In Jan. 2004 he created an acquisitions vehicle, Federal Information Technology Systems LLC, which he swiftly moved to fill out with five targeted acquisitions: Austin Info Systems Ltd., Sensor Systems Inc., IT Spatial Inc., Paragon Imaging Inc. and Visual Learning Systems. A year ago Mr. Craven's vehicle received the catchier name "Overwatch Systems LLC." And now, only three years after the company made its first deal, Mr. Craven has tied a ribbon around Overwatch's well-integrated holdings and sold them for the eye-popping figure of 325 million dollars.

We find the comparison interesting: Paravant already existed when Mr. Craven came aboard in 1996, and it took six years and an IPO to get it to the sales price of $110 million. But it took only half that time for Mr. Craven to create Overwatch from scratch and sell it for price tag which was nearly three times higher.

What made the difference?

We could throw out a few explanations… September 11th, Mr. Craven's deeper industry experience, the current hot market for intelligence companies. Surely all three played some role. But we think a fourth factor probably outweighed the others: the decision to build Overwatch Systems with private equity capital rather than through a public offering. And this wasn't just any private equity capital — owner Kelso & Co. had already been recognized for its acquisitions-driven tenure as owner of TransDigm, a Cleveland-based supplier of highly engineered aircraft components which it sold in 1998.

With no requirement to meet quarterly earnings expectations, and exempt from the Sarbanes-Oxley requirements which hobble other smaller publicly held companies, and with ready access to all the cash it needed, Overwatch was able to quickly to seize on opportunities as they presented themselves. And the company wasn't just nimble, but smart, targeting all five of its acquisitions at a single sub-niche within the C4ISR marketplace: image analysis and exploitation.

This capability represented an attractive fit for Texton Systems, which in recent years has built a Tier 1 business in unattended sensors (which we can only imagine are getting plenty of use along Iraq's borders with Iran and Syria). This technology gives the company a beachhead at the "sensor" end of the "sensor-to-shooter" chain. In July the company moved to augment its capabilities in this area with the acquisition of Innovative Survivability Technologies, a Goleta, Calif.-based specialist in the research, development and rapid prototyping of complex electronic, optical and mechanical sensors and countermeasure systems.

Meanwhile, the company of course already has the "shooter" end of the chain covered with some of the most fearsome anti-armor and anti-personnel ordnance in the U.S. inventory.

And now comes this deal, giving the company a full-blown imagery analysis capability — somewhere in the "to" portion of the "sensor-to-shooter" equation, as it were. It's hardly an end-to-end capability — not yet. But it's a sign that wheels are turning up in Textron Systems' headquarters building in Wilmington, Mass. And they're meshing well with other wheels at the Providence, R.I. headquarters of the company's parent, which undoubtedly is encouraged by generally expanding operating margins at its Bell segment (of which Textron Systems is a part).

We don't see too many conglomerates pursuing technologically-driven acquisitions strategies on behalf of their defense segments. And we still have questions about this strategy where Textron is concerned (like whether Bell and Textron Systems will someday have an operational reason for being in the same operating segment). We will watch with interest where Textron Systems' next gap-filler acquisition lands.

^ back to top


Daily Deals


Closing/
Announcement Date
Buyer Seller Purchase Price Seller Revenue
December 11, 2006 Veritas Capital Pearson Government Solution $600m 1800 Employees
December 8, 2006 Computer Sciences Corporation Datatrac Information Services N/D 1800 employees
November 17, 2006 McDonald Bradley Federal Business Unit, Software Performance $15m 80 employees
November 16, 2006 The O'Gara Group Homeland Defense Solutions N/D N/D
November 9, 2006 SAIC Applied Marine Technology N/D $85m
November 8, 2006 SAIC AETC Incorporated N/D 46 Employees
November 8, 2006 Northrup Grumman Essex Corporation $580m $234m
November 6, 2006 Triumph Group Allied Aerospce Indsutires N/D 160 employees
October 26, 2006 SRA International RABA Technologies $93.8m $60m

^ back to top


About Us

Minuteman Ventures LLC advises company owners on the sale of their businesses, and assists corporate and private equity buyers in strategic acquisitions and divestitures. Our team consists of experienced entrepreneurs and business executives who founded or operated companies and corporate divisions.

We specialize in companies that sell services, products, and solutions to federal government clients. We pride ourselves in being the investment bank for entrepreneurial companies in the federal sector.

^ back to top



Forward email

This email was sent to paulserotkin@minutemanventures.com, by paulserotkin@minutemanventures.com
Powered by

HQ: Minuteman Ventures | 11 Cypress Drive | Burlington | MA | 01803
Boston • Washington • Huntsville • Patuxent River • Dayton • Colorado Springs