Volume 2, Issue 1 April 2004

Welcome to the Federal Growth Report.

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


This issue, we hear from Eric DeMarco, the former Titan CEO now re-entering the federal market as CEO at Wireless Facilities, Inc. Also, thought-provoking pieces on the shortage of good federal IT corporate management, and advice for CEOs on the value of ‘team’ in buy- side M&A due diligence….plus the M&A deal of the month and key government contracts awarded recently.

Feedback and dialogue are welcome by writing:
paulserotkin@minutemanventures.com or calling 781 750 8065. Thanks.


Regards,


Paul Serotkin
President
Minuteman Ventures LLC

 

 
in this issue
Mid-tier Federal Magic: Driving Government Tech M&A - We look at the robust class of mid-sized buyers in federal IT.
CEO Corner - Wireless Facilities, Inc. CEO Eric DeMarco, formerly of Titan Corp., re-enters the federal market in his new role heading a wireless solutions provider.
Talent and the Government Contractor Executive - Is there enough talent to go around? Michael Lent reviews the market.
The Optimal Buy-side Due Diligence Program - Peter Dwyer lays out a plan that federal CEOs can live by.
The Federal Deal - Infobase reviews BAE Systems' purchase of STI Government Systems
Contract Central - Infobase highlights key recent contracts to small and mid-tier federal contractors.
Deals of the Month - Check out the latest sector deals
Minuteman Ventures LLC News  
 
Minuteman Ventures LLC advises company owners on the sale of their businesses, and assists corporate and private equity buyers in strategic acquisitions. Our team includes experienced entrepreneurs and business executives who founded or operated companies and corporate divisions.

We specialize in the technology sector of the federal government market. We pride ourselves in being the investment bank for entrepreneurial companies in the federal sector.
Quick Links
Government Services Insider
EdgeStone Consulting, Inc.
In-Know-Vation
WFI Network Solutions
BAE Systems
Maryland Association of CPA's

 

 

 


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Mid-tier Federal Magic: Driving Government Tech M&A


by Paul Serotkin

Well, it may not be magic, but the emergence of a robust ‘middle class’ as active corporate buyers in the federal/defense sector is certainly remarkable.

Minuteman Ventures has closely tracked these mid- tier companies, as small as $50 million in revenue and as large as $500 million. Both private and public, the companies have taken full advantage of economic and industry conditions to grow aggressively by acquisition.

As a group they now pose real competition to the larger firms who could historically make an unchallenged case to be the buyer of choice.

Most of them can now lay real claim to a goal of becoming a $500 million or $1 billion firm. Some, probably most, will not get there, often of their choosing. Some will make it through the wickets to sell their stock to the public via IPO; others will decide, after buying at lower multiples for years, they are happy to cash out at higher ones.

Let’s profile the Federal IT Mid-tier companies:

• Size – typically $50-$500m, though many are under $250 million and an increasing number are less than $100 million
• Government is their largest, if only customer
• Have usually experienced strong organic growth as well as successfully integrated previous acquisitions
• Some of the most acquisitive are backed by private equity, who are intent on growing dramatically before selling
• Many have stated claims of growing to $500 million or larger
• They are growing or want to grow faster than the government technology market as a whole

Market conditions and motivations drive the mid- tier M&A pursuit. Commercial lenders are truly educated on government contracting and transactions, and buyers are pleased to take these funds at inexpensive rates. While the public companies have strongly valued stock to use as consideration, most deals in the sector are for cash. There is a growing feeling, however, that, as these companies mature in the public market, selling entrepreneurs will become more comfortable with accepting stock for their payday.

In an industry where corporate success is marked by exceptional customer relationships, buyers find it easier to justify a ‘buy’ at the expense of ‘make’ argument, i.e., acquire rather than try to organically establish a beachhead at a new client. Plus, talented management can be quickly added, as can much needed employees with government clearances.

Who works the Mid-Tier? See our list of private companies below. It is hardly inclusive, though clearly representative of some of the active buyers. Add to that list those under $500 million trading publicly – DigitalNet, SI International, MTC Technologies, DRC, EDO and now, Wireless Facilities, for example, and you get a rounded picture of this market subset.

Company Revenue Recent Transactions

ITS Services
$200m SEA
NCI $136m
Scientific & Engineering Solutions
Sytex $275m MacAuley-Brown, INS
Stanley Associates $190m Fuentez Systems
STG $170m Decision Systems Tech.
Alion Science and Technology $200m Innovative Tech. Solutions
ICF Consulting $152m
2 Arthur D. Little units
RCI $274m Innerbase Technologies
American Systems Corp. $175m Business Plus Corp.
Management Systems Designers, Inc. (MSDI) Under $100m Kathpal Technologies, ClearBrook Solutions
Calibre Systems

Strategic Mgt. Initiatives
FC Business Systems
AmerInd
Innovation Technology Applications
IT Specialists, DKCS

Minuteman Ventures LLC President Paul Serotkin spoke March 10, 2004 on the “Mid-tier Federal/Defense M&A Market’ at the annual Strategic Research Institute Conference on Defense and Aerospace Investment and Corporate Development. For a copy of the presentation, click here.

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CEO Corner
 

Eric DeMarco, CEO, Wireless Facilities, Inc., a noted M&A dealmaker who earned his stripes as a growth-oriented executive while building Titan Corp. (NYSE:TTN) into a major defense technology contractor. Eric last year joined Wireless Facilities, Inc. (NASD:WFII), assuming the role of CEO for San Diego-based WFI April 1, 2004. With revenue of $262 million in 2003 and estimating $405 million in 2004, the company has garnered considerable Wall Street support (a market value of about $900 million on a fully diluted basis). Eric re-entered the federal market in early January with WFI’s acquisition of High Technology Solutions, Inc., a $44 million firm. WFI is a global leader in wireless telecommunications networks and security systems.

FGR: WFI gained its reputation as a specialist in wireless communications and networks. What attracted you to the federal government market for acquisition?

ED: We believe that some 50% of the $60 billion federal IT budget involves wireless communications in some form. Our solutions play very well in the federal market, in many respects, whether providing improved mobility and networking for combat systems, enhanced first responder capability or integrating with RFID (radio frequency identification) systems for logistics use.

Both DoD and the Department of Homeland Security are increasing their requirement for wireless solutions as a means of transforming the warfighter and deterring terrorism.

With the acquisition of HTS, our federal strategy is underway as HTS provides an excellent foundation from which to pursue our strategy.

FGR: What made HTS so attractive?

ED: In addition to its core C4ISR business, HTS had made inroads in the homeland security market at both DHS and within the DoD. We knew from our experience at Titan how important it was to have these customer and contract vehicle relationships in place when approaching the federal market.

HTS’ Tactical Survey system, which targets the first responder market, enables emergency responders to understand in real time the features of a facility when arriving on the scene to combat fire, chemical explosion or terrorist attack. We plan to integrate this product with wireless capability to enhanced its use and configure the system for optimal homeland security applications.

FGR: WFI had grown without the benefit of acquisitions. Why is the company now embarking on an acquisition program?

ED: WFI has not needed acquisitions to grow. Our plan is to grow approximately 50% this year, with organic growth of approximately 30% without any further acquisitions. However, I had excellent results in creating shareholder value at Titan using M&A as a growth tool. We grew from $125 million to $1.6 billion in my six years there, and while much of it was through acquisitions, our acquisition strategy also helped fuel our organic growth rate which increased significantly over the years.

At WFI, we believe we can address the needs of the federal sector faster by acquiring strategically aligned firms. This strategy of applying our wireless solutions to federal customers is already paying off. WFI is now bidding on new, major procurements for several federal agencies that call for seamless, wireless communication among first responder networks.

One lesson learned from my Titan experience is to know ‘cold’ any market you are about to enter. We understand the federal government market very well.

FGR: What types of companies are you seeking in the federal sector?

ED: Companies that meet one or more of several criteria:
- RFID capability
- Wireless sensors and networks
- Spectrum management
- Wireless network communications design, development and maintenance

FGR: How has Wall Street viewed the HTS transaction?

ED: Our share price increased immediately upon the announcement. We believe that this was because Wall Street understood our strategy and our desire to capitalize on our core capabilities. We think that, when combining the growing use of wireless networks, our expertise in this market, and the burgeoning applications in the federal sector, Wall Street will continue to look favorably on our strategy as we continue to execute it. (Ed. Note: The WFI share price has fallen since January 1, 2004, largely a result, the company says, of additional shares coming to market from the maturation of a convertible preferred issue.)

FGR: You have lot of experience in buying businesses. What advice do you have for company CEOs contemplating sale of their firm?

ED: Approach M&A process with high integrity. Once you distribute data to a potential buyer, make sure that data is accurate and fully disclosed, and that you meet projections during the negotiating period. Should material information be uncovered during this process that does not square with your assertion, credibility will be strained going further. We tend to be very trusting in what you show us so make sure the data is correct and supportable.

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Talent and the Government Contractor Executive
 

By Michael Lent

Some senior managers of government services firms temper current optimism about business expansion. “I don’t have enough good people” is often the leading complaint, especially concerning senior- level talent.

To distill expert perspective and to identify what companies should be doing about the “renewed war for talent” purported in the business press, the Insider talked with some of the top headhunters in Washington, focusing on positions critical to growth, those at >$150K base salaries.

Is There Really a War? As military leaders have said often in the last year: the first reports from a battle are usually wrong. In this case, the experts’ consensus view is: there is no resurgence of the “war for talent” in the sense it was fought a few years ago. We’re out of a recession, and federal contract spending is positive in many sectors, thus hiring needs are rising faster than in the last few years. But it’s not a panic, characterized by last-minute sourcing, force fitting, light vetting, and expansive salary offers.

Liz Clauhsen of Savoy Partners says, “competition for top talent never really stopped, but many firms seem to have given up on the careful grooming and planning for the rise of internal talent. In some successful firms, it’s still ‘survival of the fittest.’”

What’s in Short Supply? Not junior and mid-level staff, according to those interviewed, but it’s less of a buyers market than a year ago, and there’s more recruiting workload. Senior talent is in relatively short supply, but not painfully so. Liz Clauhsen, who frequently works with players in the federal arena, says most senior-level searches are being completed. Her partner, Savoy founder Bob Brudno, seconds the motion and adds “if the client’s a successful, attractive company, there would rarely be a problem; those that have been through trauma or which have large uncertainties will always be more challenging.”

What’s the Cause of the Senior Management Shortage? The most fundamental cause is demographics. Just like its customers, the government services industry is experiencing a spike in retirements of people in their fifties, at or near the helm of the enterprise or running major divisions. Mike Kirkman, head of Spencer Stuart’s Washington office sees a “missing” generation of managers in several companies, whose internal production of senior talent has not kept up with business growth or complexity. The rising stars 10-15 younger are not numerous enough to suffice.

Ironically, government customers, facing the same demographic cliff, are getting deeply into “human capital management,” and it’s a hot service offering for several firms. But the service providers don’t treat themselves the same way, the headhunters believe. Those interviewed cited Booz Allen’s government business and SAIC, two of the few privately held companies in a sea of publicly owned firms in the large-size stratum of the industry, for being considerably more skillful in growing talent internally.

What’s in Greatest Demand? Companies hesitate to admit it, but in the senior ranks what is most prized is access to clients. According to Bill “Mo” Marumoto of the Interface Group, “They don’t need to know the mechanics of business development but they need to have verifiable current access and broad name recognition.” An example is Booz Allen’s hiring in the last few years from the top ranks of the intelligence community such leading lights as Keith Hall, former Director of the National Reconnaissance Office.

Even with unquestionable compliance with ethics regulations, the returns can be large. These individuals should be so well known that they have high name recognition in whole communities, going well beyond the specific agency they led. Examples of such communities of top interest now are intelligence, law enforcement, and parts of DoD.

Another headhunter noted that “buying access” through key hires is far more common in the government services industry than business at large. He says that someone else will need to take up the management of organizational units and delivery, but that’s more than a fair trade for larger firms. Some firms structure responsibilities to pair a Ms. Inside with Ms. Outside.

Bob Brudno says there is still, at the top levels, need for generalists who can market and sell, oversee delivery, and manage a sizeable business. He says “many companies don’t grow these kinds of people; they’re developed and promoted in silos.” The large systems integrators and some Fortune 1000 companies entering the federal arena fit this description. In many mid-size firms, also feeling a talent squeeze, only a few people get involved in business development, says Brudno.

In terms of program and policy focus, all agreed that homeland defense, followed by defense and intelligence are the hottest areas. “It’s simple,” one headhunter said, “follow the money.”

Top-level Candidates Need More Screening: Marumoto says many resumes and initial interviews suggest desirable candidates, that that is often as an illusion. In the last few years, many of them have been restructured out of their most challenging jobs, been “bumped,” or eased out. He says the competent search firm will be able to decipher and confirm claimed accomplishments. (As a side note, the prevalence of “teams” in some firms makes it harder than ever to attribute success to individuals—good for the firms, perhaps, but hard for headhunters). He also advises prudent skepticism, as some good candidates may have faced relatively easy or no market competition, or benefited from the “legacy” client relationships handed down to them.

Mike Kirkman reiterated a familiar view of top headhunters: “the best people are the ones not looking.” He also points out that top search firms are “reallocators of talent.” While the circumstances have to be just right, they can satisfy client because they know enough good places to look. Bob Brudno of Savoy refers to the large surplus of former telecommunications executives, noting that they are not obvious transplant candidates into federal IT companies. He says, “look what was happening to the firms they left.”

Competing for Talent. Spish Rurak of Rurak & Associates, a Washington headhunter for nearly 20 years serving tech firms, including large integrators, states the battle plan succinctly: “If our clients did truly effective professional development and succession planning, headhunters would have very little business.”

He says companies can save time, money, and frustration by coming up with a detailed specification of a position’s functions, roles, and requirements before engaging a search firm. This should be related to an overall, time-phased succession plan that reflects the development of internal candidates.

Easing the Search for Top-Level Talent

1. Have realistic plans for management development and succession—think several steps and years ahead.

2. Favor internal talent when you have it; implement and maintain a rigorous, useful performance appraisal system

3. Have a retention program; each success can preclude the costs, uncertainties, and morale issues from hiring from the outside.

4. Recognize that a company in bad shape or with daunting challenges is going to have a relatively tough time recruiting at any level.

Michael Lent is publisher and editor of Government Services Insider, the only independent publication on management challenges prepared for and about executives in the government and technology services industry. Contact him at editor@gsinsider.com or 202-237-0765. Or visit: www.gsinsider.com.

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The Optimal Buy-side Due Diligence Program
 

By Peter Dwyer

As CEO, CFO or Director of M&A, how often have you asked people in your company to assist in the due diligence of an acquisition target, and been met with blank stares.

“Why me? I already have too much on my plate,” they say. They start looking at documents, identify show stoppers, and get back to their job as quickly as possible.

If this happens at your company, you are not fully capturing valuable data that your team is learning during the due diligence phase. Instead of losing this valuable information, it is important to use this time to begin integration planning for the acquisition, and enlist the help of your entire team in this process.

The first step is to assign one person to lead the team from the start of the due diligence process to the end of the successful integration phase of your acquisition. This person should be a senior level manager that possesses skills in Finance, Operations, People, and Leadership. And most important, they need to devote full focus on this task.

Prior to assembling the due diligence team, the manager should lay out a structured plan that begins with your company’s overall objectives with the acquisition. If your company is planning to combine the acquisition target for one of your existing units, the approach will be different than if the target is maintained as a separate business unit, with little integration.

Once the plan is set, assemble a team representing a cross section of your company: Finance, HR, Operations, Marketing, and Contracts/Legal. All members of the team need to be briefed on the acquisition target, why it is a strategic fit with your company, how it will be integrated into your company, and their role throughout this critical process. They are going to play a significant role in this acquisition, and play an important part in successfully integrating the new company.

Each functional team member will be given specific areas to consider upon beginning due diligence, always maintaining a focus on the post acquisition integration phase. While the overall plan will contain as much detail as required for each area, I have highlighted a few items to be considered:

  • Finance
    o Review of revenue recognition policies for the new company. Are they consistent with your policy?
    o How will the accounting systems be integrated?
    o Is their internal control system up to your standards?
  • HR
    o How do their benefits compare with yours, and what is the plan to bring them in line with your plan?
    o Are their policies consistent with yours?
    o How does their compensation system compare with yours?
    o What is the communication plan on the acquisition to all employees in both companies?
  • Operations
    o Are there duplicate operations in the same location that can be combined?
    o How will the new operational units report in to your company?
  • Marketing
    o How can we leverage the skills of the new company in our proposals?
    o How do we effectively cross sell our capabilities into the new markets we have acquired, and vice versa?
    o What is the communication plan to customers of both companies? Why does the acquisition make sense? How will it benefit the customer?
  • Contracts/ Legal
    o What is their contract mix?
    o What is their proposal pricing policy?
    o What is their track record for meeting deliverable schedules?

Another important aspect of your team’s success is its ability to open the lines of communication with counterparts in the acquired company - and listen to what they say!

Many of them have insight into what is good within the company, and what needs improvement. While some of this will be venting from nervous and maybe unhappy employees, some comments will be valid, and warrant consideration. Talk to your team about listening and making note of these comments. You may never get these honest comments from the executives at the “C” level.

While this is only the tip of the iceberg, it illustrates that a well structured integration plan should start at the beginning of the due diligence phase of the acquisition. It should enlist other key players in the organization, giving you an extra few months to plan for the successful integration. This process should significantly increase your chances of acquisition success.

Peter Dwyer is co-founder of EdgeStone Consulting, specializing in acquisition consulting and due diligence support to firms in the federal marketplace. For additional information, contact Peter Dwyer at pdwyer@edgestone.net, or review more detailed information at www.edgestone.net.

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The Federal Deal
 

FGR offers analysis of a recent M&A transaction involving small- to mid-tier government technology 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@infobasepub.com) or click www.infobasepub.com.

BAE Systems Acquires STI Government Systems

BAE Systems North America reached a definitive agreement with STI Industries, Inc. (STI), to purchase the assets of Honolulu, Hawaii- based STI Government Systems.

STI Government Systems develops solutions for U.S. government customers with its expertise in photonics, information technologies and system integration. Currently, STI Government Systems supports the U.S. Navy in defense applications of its technologies and also provides a variety of services to other government agencies in areas such as pollution mapping and search and rescue.

Galen Ho, president of BAE Systems North America's Information and Electronic Systems Integration Sector, stated: "STI Government Systems scientists and engineers are well respected throughout government and industry for their innovative technology solutions. They bring great talent for transforming concepts into solutions and technology. Their capabilities - particularly in hyperspectral imaging and sensor fusion - will be important elements in support of our Communications, Intelligence, Surveillance and Reconnaissance arena."

Ho concluded: “Together we will be able to provide our customers with more innovative solutions to meet demanding defense and security requirements, particularly in detection of submarines, mines, and other objects in the water as well as terrestrial object identification and surveillance."


TERMS

On April 5, 2004 BAE Systems announced a definitive agreement to acquire STI Government Systems for $27 million in cash. STI Government Systems employs 125 people.


ANALYSIS

This acquisition is the second made by BAE SYSTEMS North America on behalf of its Information and Electronic Systems Integration Sector. This deal has been announced 13 months after the sector concluded its buy of Washington, D.C.-based Advanced Power Technologies, Inc. (APTI).

Both STI and APTI are R&D houses, and both, coincidentally, are costing BAE SYSTEMS the same amount—$27 million in cash, each. But the similarities end there. The two companies operate in different technological areas.

In fact the most interesting comparison so far as this deal is not the acquisition of APTI, but the divestiture last November of the Braintree, Mass.-based Ocean Systems business from the same CNIR group of the IESI segment. Ocean Systems was a producer of special purpose acoustic and RF devices and systems for submarines, surface ships and acoustic test ranges.

At first blush BAE SYSTEMS might be seen as picking up pretty much the same kinds of capabilities with the STI deal that it divested a few months ago in the Ocean Systems deal (Galen Ho says that STI gives the company technology geared to the “detection of submarines, mines, and other objects in the water”). But look again. Ocean Systems was a hardware producer—a maker of special purpose acoustic and RF devices and systems for submarines, surface ships and acoustic test ranges. And STI, while having hardware capabilities, is a giant step up the feeding chain, less a hardware manufacturer than a systems integration hourse, with expertise in hyperspectral imaging and sensor fusion.

And so the STI deal is properly seen as another installment in the ongoing transition of BAE SYSTEMS from hardware house to systems integrator. And another trend is at work here, too: based on the size of the Ocean Systems and STI deals, BAE SYSTEMS appears to have come out well ahead in terms of the net effect on its top line. A nice, if modestly sized, return to the acquisitions trail for BAE SYSTEMS North America.

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Contract Central
 

FGR presents briefs on selected technology services contracts awarded by the U.S. government to mid-tier federal contractors during the last two months. The briefs are compiled by InfoBase Publishers, Inc.©, a leading provider of competitive intelligence for the worldwide defense/aerospace industry. All rights reserved. For more on InfoBase Publishers' services, contact Bill Burton (410.820.6821), wkburton@infobasepub.com or click www.infobasepub.com

Army ITEC4 Sole-sources Ki, LLC to Support Network Operations and Security Center

On January 28, 2004, the U.S. Army Contracting Activity, Information Technology, E-Commerce and Commercial Contracting Center - West (ACA ITEC4-West) (Ft. Huachuca, NM) awarded Ki, LLC (Colorado Springs, CO) a $7.9 million fixed-price contract (W91RUS-04-C-0013) to support the Army Network Operations and Security Center (ANOSC) (Ft. Belvoir, VA).

Under the contract, the company will provide network operations/computer network defense information dissemination management shift operations, operations and information assurance (IA), network and system administration, webmaster, database management, configuration management (CM), shift/team leader and site manager support. Work will be performed at Fort Belvoir, VA.


DARPA Inks CSCI to Study Feasibility of Information- on-Demand Network

On February 13, 2004, the U.S. Defense Advanced Research Projects Agency (DARPA) (Arlington, VA) awarded Computer Systems Center, Inc. (CSCI) (Springfield, VA) a $13.3 million, cost-plus-fixed-fee contract (HR0011- 04-C-0047) for the Information-on-Demand project, a special access program (SAP) network feasibility study.

Under the contract, the company will refine its flagship product, Trusted Information Infrastructure (TII), which it has been developing for the past eight years. TII ensures a trusted information security (INFOSEC) environment that allows for the secure transfer of information between secure networks at multiple levels, giving access to individuals on a need-to-know basis.

DTRA Chooses Cherokee Information Services in DIAMONDS 8(a) Competition

On March 29, 2004, the U.S. Defense Threat Reduction Agency (DTRA) (Ft. Belvoir, VA) awarded Cherokee Information Services, Inc. (Arlington, VA) an eight-year, $27.3 million, cost-plus-award-fee contract (HDTRA1- 04-C-0009) for the development of the Defense Integration And Management Of Nuclear Data Service (DIAMONDS).

Under the contract, the company will be responsible for the continued development and enhancement of a consolidated nuclear automated information system. DTRA currently manages three systems to track the nuclear stockpile, facilitate reporting, and provide other mission-related functions. These are the Special Weapons Information Management (SWIM) system, the Nuclear Management Information System (NUMIS) and DIAMONDS. SWIM and NUMIS will be subsumed into DIAMONDS, to which new features and upgrades will be added.

The contract was competitively procured through solicitation HDTRA1-04-R-0001, which was issued on November 26, 2003, and called for competition limited to 8(a) firms only.

NASA GSFC Inks INFONETIC to Support Technical Information Services Branch

On February 2, 2004, the NASA Goddard Space Flight Center (GSFC) (Greenbelt, MD) awarded Information Network, Inc. (INFONETIC) (Lanham, MD) a five-year, $33.9 million, performance-based, cost- reimbursement, award-fee contract (NNG04AZ05C) for technical information services supporting GSFC’s Technical Information Services Branch.

Under the contract, the company will perform services that consist of service desk and facility scheduling, conference planning, audiovisual support, duplicating, graphics and photography services, publications and documentation services, and equipment maintenance.

NAWCAD Names 46 Teams for Acquisition Program Management Support under PM MAC

The U.S. Naval Air Warfare Center - Aircraft Div. (NAWCAD) (Patuxent River, MD) awarded 46 parallel, five-year contracts, worth $460 million collectively, for the Program Management Multiple Award Contract (PM MAC).

There were four lots of recipients, for firms classified as: HUBZone, 8(a), Small Business, and Unrestricted.

Under the multiple-award program, these companies now will compete for task orders to provide support services for all acquisition phases of naval aircraft and aviation weapon systems including research, design, development and engineering, acquisition, test and evaluation (T&E), training facilities and equipment, repair and modification and in-service engineering and logistics support. The U.S. Naval Air Systems Command (NAVAIR) organizations to be supported include NAVAIR Headquarters, NAWCAD, NAVAIR Depot (NAVDEP) Cherry Point, and the Program Executive Offices (PEOs).

NAWCAD will compete task orders among contract holders within a specified lot. For example, a Lot II contract holder cannot bid on a Lot III task order. The majority of the work will be performed at Naval Air Station (NAS) Patuxent River, but some tasks may require support at St. Inigoes, MD; Lakehurst, NJ; Arlington, VA; and Cherry Point, NC.

The program is considered a follow-on that consolidates work previously performed under separate NAVAIR-related support services contracts too numerous to list. NAVAIR’s PM MAC appears to be modeled after a similar MAC program initiated by the Navy. In April 2001, the U.S. Naval Systems Command (NAVSEA) (Washington, DC) awarded contracts to 21 companies for the NAVSEA MAC, also known as Professional Support Services (SeaPort). Since then, NAVSEA has competitively awarded more than $2 billion in task orders under SeaPort, which has a $14.5 billion ceiling over its 15-year ordering period.


NAWCAD Selects Four Small Businesses to Support AIR-4.5

The U.S. Naval Air Warfare Center - Aircraft Div. (NAWCAD) (Patuxent River, MD) awarded four parallel, five-year, IDIQ contracts, worth $106.7 million collectively, to support research and development (R&D), integration, analysis, assessment and test and evaluation (T&E) of avionics equipment, sensor systems, systems, subsystems and components.

The recipients were:

-- Coherent Systems Joint Venture LLC (Lexington Park, MD), a joint venture of Coherent Systems International Corp. (Lexington Park, MD) and Eagan, McAllister Associates, Inc. (EMA) (Lexington Park, MD) (N00421- 04-D-0072).

-- DCS Corp. (Alexandria, VA) (N00421-04-D- 0073).

-- Galaxy Scientific Corp. (Egg Harbor Township, NJ) (N00421-04-D-0074).

-- Sabre Systems, Inc. (Warminster, PA) (N00421- 04-D-0075.).


NSWCCD Awards Services Contract to Native American Consultants, Inc.


The U.S. Naval Surface Warfare Center, Carderock Div. (NSWCCD) (Bethesda, MD) awarded Native American Consultants, Inc. (NACI) (Washington DC) a five-year, $9 million, cost-plus-fixed-fee, IDIQ contract (N00167- 04-D-0020) for engineering and analytical contractor advisory and assistance services.

Under the contract, which has an estimated level of effort (LOE) of 18,500 labor-hours per year, the company will support a broad spectrum of research, development, testing and evaluation (RDT&E) projects dealing with materials technology and technologies and disciplines used in development of Navy ships, submarines, aircraft and weapon systems. The work will be performed in Annapolis, MD (80%) and West Bethesda, MD (20%).

The contract was competitively procured through solicitation N00167-03-R-0048, which was issued on June 19, 2003, and called for competition limited to small businesses only.

NSWCCD Names QED, LCE to Support Systems Integration & Program Development Group

The U.S. Naval Surface Warfare Center, Carderock Div., Naval Ship Systems Engineering Station (NSWCCD NAVSSES) (Philadelphia, PA) awarded two parallel, five-year, cost-plus-fixed-fee, IDIQ contracts, worth $75.6 million collectively, to support of the Systems Integration & Program Development Group.

The recipients were:

-- Q.E.D. Systems, Inc. (Virginia Beach, VA), which was awarded a $36.3 million contract (N65540-04-D-0026).

-- Life Cycle Engineering, Inc. (LCE) (North Charleston, SC), which was awarded a $39.3 million contract (N65540-04-D-0027).

Under the multiple-award program, the two companies now will compete for task orders to provide engineering, technical, and logistics support services, including the engineering and technical personnel and facilities required to develop and integrate technological improvements focused on logistics support of the maintenance processes for the U.S. Navy. This will include the implementation and execution of condition assessment, monitoring, and systems integration programs being developed and conducted by the Systems Integration and Program Development Group.

SPAWAR Awards ORI $200M 8(a) Contract to Run C4I Equipment Depot

On March 11, 2004, the U.S. Naval SPAWAR Systems Center San Diego (SSC-SD) (San Diego, CA) awarded ORI Services Corp. (San Diego, CA) a nine-year, $198.7 million, cost-plus-fixed-fee, IDIQ contract (N66001- 04-D-5025) for technical support services at the Naval C4I Restoration and Repair Depot.

Under the contract, which has an estimated level of effort (LOE) of 316,850 labor-hours per year, the company will support the Systems Support Engineering Div. of SSC-SD’s Fleet Engineering Department (Code 265) by performing services that include manufacturing, restoration, repair, overhaul, installation and calibration of ground, ship and airborne command, control, communications, computers, intelligence, surveillance, and reconnaissance (C4ISR) equipment.

USAF 38 EIG Chooses CSC, RCI, MILCOM for $90 Million C2COMM Program

The U.S. Air Force 38th Engineering Installation Group (38 EIG) (Tinker AFB, OK) awarded three parallel five-year IDIQ contracts, worth $90 million collectively, for the Command and Control Communications (C2COMM) program.

The recipients were:

-- CSC Federal Sector, Defense Group, Aerospace unit (Falls Church, VA) (FA8773-04-D-0002).

-- MILCOM Systems Corp. (Virginia Beach, VA) (FA8773-04-D-0003).

-- Resource Consultants, Inc. (RCI) (Vienna, VA) (FA8773-04-D-0004).

Under the multiple-award program, these three companies will compete for task orders to provide site survey, engineering, technical exchange meetings, materials, minor construction, installation, testing, and data items for the six communications commodities supported by 38 EIG (i.e., flight facilities systems, radio frequency systems, network systems, switching systems, security systems, and distribution systems) at CONUS locations.


USAF AFRL RRS Picks Dolphin Technology to Develop ISSE Guard

The U.S. Air Force Research Laboratory, Rome Research Site (AFRL RRS) (Rome, NY) awarded Dolphin Technology, Inc. (Rome, NY) a five-year, $35.5 million, IDIQ contract (FA8750-04-D-0029) to develop Information Support Server Environment (ISSE) Guard software and conduct system support for the Air Force Command and Control Intelligence Surveillance and Reconnaissance Center (AFC2ISRC/A-2) (Langley AFB, VA) and the Department of Defense Intelligence Information System (DODIIS) community.

Under the contract, the company will develop the ISSE Guard, an information-sharing software system that allows for secure collaboration and information sharing between organizations.

The added work will mean more jobs at the company, said Miravalle. Dolphin employs 79 people. The contract, he said, "means a lot to us. It positions us as a prime contractor.

USCG R&DC Selects Incumbent PMG in 8(a) Admin/Technical Support Recompete

The U.S. Coast Guard Research and Development Center (USCG R&DC) (Groton, CT) awarded Potomac Management Group, Inc. (PMG) (Alexandria, VA) a five-year, $18 million, time-and-materials, IDIQ contract for administrative and technical support services.

Under the contract, the company will provide services that include information, logistics, library and meeting facilitation services, Internet/intranet/office automation support and project planning, studies, technology investigations, analysis, and engineering.

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Deals of the Month
 

Closing/Anncmt. Date Buyer Seller Purchase Price Seller Revenue
April 5, 2004 BAE Systems STI Government Systems $27m 125 empls.
April 1, 2004 Sys Technologies Polexis $6m $8m
April 1, 2004 RGII (Computer Horizons) Automated Information Management $13.7m $18.5m
March 25, 2004 Widepoint Corporation Chesapeake Government Technologies N/D  
March 10, 2004 CACI International American Management Systems (Defense and Intelligence Group) $415m $250m
March 8, 2004 Tetra Tech, Inc. Advanced Management Technology, Inc. (AMTI) N/D $96m
February 27, 2004 CALIBRE Strategic Management Initiatives N/D $5m
February 25, 2004 Advanced Technology Systems Voyager Systems N/D N/D
February 13, 2004 Alion Science and Technology Identix Public Sector N/D 120 employees
February 13, 2004 CACI International CMS Information Services N/D $38.7m

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Minuteman Ventures LLC News
 

Gene Townsend has joined Minuteman Ventures as an Advisor, with the aim to focus the firm even more heavily on Naval RDT&E markets. Gene is the former chief financial executive for the Naval Air Warfare Center – Aircraft Division in Patuxent River, Md….. Also joining us as an Advisor is Steve Giddens, Enterprise Director, Information Technology, with Information Network Systems, Inc., a TSGI Company. He is a seasoned technical executive with proven expertise in information technology, eCommerce, business development and program management..…... Paul Serotkin spoke Mar. 18 on Capitol Hill at a conference entitled the Economic Impact of the SBIR - Small Business Innovation Research – program. Now having garnered $20 billion in R&D grants for smaller firms since 1982, the conference showed that SBIR winners gain higher M&A multiples than those who have not won such awards. The conference was organized by Inknowvation Development Institute (See www.inknowvation.com) Cli ck here to see his talk. Serotkin was also invited to speak October 15 on federal M&A before the annual meeting of the Maryland Association of CPAs. For more on the group, see www.macpa.org. We continue as guest author on mid-tier federal/defense M&A issues for the monthly publication, Defense Mergers & Acquisitions (DM&A). Our February column opined on the future of SAIC’s M&A strategy. In March we interviewed Ken Bajaj, dealmaker extraordinaire, now CEO of DigitalNet (NASD:DNET). Minuteman Ventures was also prominently featured in the April issue of Government Services Insider, addressing the robust mid-tier M&A market in the federal sector. See the publication web site, www.gsinsider.com, for more.

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

We specialize in the technology sector of the federal government market. We pride ourselves in being the investment bank for entrepreneurial companies in the federal sector.

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www.minutemanventures.com

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