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Venture Management
Volume 6, Issue 4 December 2008

Welcome to the Federal Growth Report, the newsletter published by Venture Management, Inc. Now in its 23rd year, our firm provides investment banking services with emphasis on mergers & acquisitions, divestitures, and management buy-outs, and including strategic advisory and growth capital funding services.

We support federal contractors having clients in the defense, aerospace, intelligence, homeland security and civilian sectors. These clients include public and privately held corporations, as well as their investors and lead executives.


Mark Shappee
Paul Serotkin
Venture Management, Inc.


October 2008

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In This Issue
Kratos Defense & Security Solutions, Inc. merges with Digital Fusion, Inc. (DFI)
Top Dollar: How to Achieve A Premium Valuation For Your Professional Services Firm
Daily Deals - Latest Sector M&A Deals

logo_dacis_140.jpg, 9.5kB Venture Management, Inc. 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. Its Defense Mergers and Acquisitions (DM&A) module (reachable at www.dacis.com), is the most comprehensive collection of industry M&A data and analysis in the market.

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.

button_dacis_red.gif, 6.2kB For more on InfoBase Publishers and its web-based Defense/Aerospace Competitive Intelligence Service (DACIS), visit www.dacis.com or contact Stuart McCutchan (sjmccu@dacis.com) (703.327.8470) for a personal tour.

The Minuteman Federal Deal Meter
  Purchase price  
  Under $50m $50–100m Over $100m Total Deals
YTD 2008 40 11 14 65
2007 46 17 11 74

The Federal Deal Meter covers M&A transactions of services firms principally serving federal agencies. Transactions covered are those announced from January 1, 2008 through December 09, 2008, and the corresponding period in 2007.

For the list of M&A transactions closed in the sector through December, 09, 2008 and 2007, email paul@venturemanagement.com.

Kratos Defense & Security Solutions, Inc. merges with Digital Fusion, Inc. (DFI)

Kratos Defense & Security Solutions, Inc. (NasdaqGS: KTOS) announced that it has entered into a definitive agreement to merge with Digital Fusion, Inc. (DFI)

Huntsville, Alabama-based Digital Fusion, Inc. specializes in providing technical expertise in Aerosciences & Engineering Analysis; Sensor and Space Systems; Optics; System Engineering & Integration; Modeling & Simulation; and Advanced Design, Development & Prototyping for both government and commercial customers. DFI is a leading provider of modeling and simulation, information technology, research and engineering, acquisition and business support services, primarily to the United States government. DFI provides Kratos with new customers and an expanded contract vehicle portfolio, as well as broadening the range of service offerings to the existing Kratos customer base. Principal customers of DFI include the Army Aviation and Missile Research, Development and Engineering Center (AMRDEC), Army Space and Missile Defense Command/Army Forces Strategic Command (ARSTRAT), NASA Marshall Space Flight Center, and certain classified customers.

In its announcement of the transaction, Kratos said that:

"The combined company will provide the Department of Defense and other federal, state, and local government customers with an expanded portfolio of capabilities and qualifications for national defense, homeland security, and public safety and security, and further enhance Kratos' ability to capture a larger share of its target markets as a prime contractor."

The addition of DFI's highly educated, uniquely qualified, and cleared employee base significantly enhances Kratos' qualifications to bid on an increasingly broad and diverse range of opportunities. Once the merger is completed and the transaction is closed, Kratos will have approximately 2,250 employees. Approximately 80% of Kratos' government employees hold national security clearances. DFI employs approximately 300 people."

FGR offers analysis of M&A transactions involving government contractors. The analysis is written by Stuart McCutchan, president and CEO of InfoBase Publishers, Inc. online publisher of the market-leading Defense/Aerospace Competitive Intelligence Service (DACIS). Opinions expressed below are those of InfoBase. All rights reserved. For more on InfoBase Publishers, see www.dacis.com.

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Top Dollar: How to Achieve A Premium Valuation For Your Professional Services Firm

The scenario by now is familiar. Trade publications and the rumor mill are abuzz with the news that an up-and-coming firm has been sold for an eye-popping premium over its competitors. With a combination of curiosity and envy, everyone wants to know how they did it. What made that particular firm so much more valuable than its peers? Was the buyer a fool? What made the firm so special?

This is a study for senior executives and owners of professional services firms interested in maximizing the value of their company. This study was designed to shed light on the factors that drive well-above-average valuations. We refer to them simply as premium valuations.

Not every firm is interested in being acquired. But as we conducted the research we learned that many of the findings are relevant to any firm that wants to maximize its value in a sustainable way. The study addresses two key topics:

  • What does it take to achieve a premium valuation for a professional services firm?

  • How should a management team go about building a firm that commands a premium valuation?

This basic concept helps explain how acquirers and valuation experts look at professional services firms. Every piece of data the experts examine, from the hardest financial variable to the softest impression of a firm's reputation, helps to shape an overall impression.

But when it comes to premium valuations, not all factors are equally important. Here's how the specific factors rank, based on a rating of individual criteria by each study participant.

Ranking Factor Average Rating*
1 Strength of Exhisting Client Relationships
2 Technology
3 Quality of Management Team
4 Marketing Strategy
5 Financials
6 Employees
7 Profile/Image

Click here to download the full Top Dollar Govt Report.

This study was researched and produced by Hinge, a marketing firm specializing in professional services companies. Headquartered in Reston, Virginia, it is located at the heart of one of the nation's largest concentrations of professional services firms. Their comprehensive offerings include research and strategy, brand development, award-winning creative and marketing outsourcing. Visit Hinge's website for free educational resources and learn more about their services. Visit www.pivotalbrands.com, 703-391-8870

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Daily Deals

Buyer Seller Purchase Price Seller Revenue
December 9,2008 New Mountain Partners III, LP
Camber Corporation
N/D $300m
December 3, 2008 L-3 Communications
International Resources Group Ltd. (IRG).
N/D $100m
December 1, 2008  Mantech International 
EWA Services, Inc. 
N/D   $20m (08 est.)
November 24, 2008  ISO 
Atmosperhic and Environmental Research (AER) 
N/D   $16m (est.)
November 24, 2008   Kratos Defense & Security Solutions  
Digital Fusion, Inc. 
$31.75m (est.)   300 people
October 31, 2008   The Shawmark Group 
Aspiration Software LLC (majority investment)  
N/D  N/D
October 16, 2008   Boeing Co. 
Federated Software Group 
N/D  150 employees
October 15, 2008   Clinton Rubin LLC 
McConnell International LLC 
N/D  N/D
October 10, 2008  Veritas Capital 
CherryRoad GT, Inc. 
N/D  N/D

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About Us

Venture Management, Inc. (VMI) is an investment bank that provides merger and acquisition advisory services to technology based businesses, their investors and lead executives. VMI is particularly known for its expertise in supporting consolidation strategies in the Federal Services market, especially for firms in the aerospace and defense, intelligence and homeland security sectors.

For more information regarding Venture Management's services, call Mark Shappee at (805) 644-5335 mark@venturemanagement.com or Paul Serotkin at (781) 750-8065 paul@venturemanagement.com

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