Volume 3, Issue 3 August 2005

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



Burlington, MA (HQ)
No. Virginia
Huntsville, AL
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in this issue
 
Federal/Defense Services M&A at Mid-Year 2005: Robustness Still Rules
Our Top 10 (Federal) Deal Breakers
Understanding the Private Equity Buyer of Federal Services Companies - David Ehrenfest Steinglass, Managing Director of American Capital Strategies, weighs in.
Federal M&A Musings - Upcoming IPO is encouraging.
The Federal Deal - A review of the recently announced acquisition by QinetiQ of Apogen Technologies.
Contract Central - Highlighted are key recent contracts to federal contractors.
Deals of the Month - Check out the latest sector M&A deals.
Minuteman Ventures LLC News

The Minuteman Federal Deal Meter
  Purchase price  
  Under $50m $50–100m Over $100m Total Deals
YTD 2004 37 7 3 44
YTD 2005 32 7 5 44

For more on this chart, click here.


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 and product solutions to federal government clients. We pride ourselves in being the investment bank for entrepreneurial companies in the federal sector.


Federal/Defense Services M&A at Mid-Year 2005: Robustness Still Rules

The move to consolidate the services segment of the defense and federal market actually outpaced the market from 2004, a hot market in its own right.

Counting U.S. defense services firms and others with a principally federal component, some 40 deals were completed in 2005 through June 30, compared to 37 for the same period last year.

Authored by Minuteman Ventures president Paul Serotkin, this article appeared in the July 2005 issue of Defense Mergers & Acquisitions (DM&A). For the full article, click here.

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Our Top 10 (Federal) Deal Breakers

Minuteman Ventures LLC President Paul Serotkin joined with Holland & Knight LLP's Bill Mutryn July 27 on audioconference titled "How to Avoid the Deal from Hell." The session focused on M&A transactions in the government services sector. Paul gave the seller's perspective; Bill, a veteran attorney in the federal sector, provided a buyer's view.

Government Services Insider (GSI) sponsored and organized the event. To purchase CDs of the recorded event, send an email to editor@gsinsider.com. For more on GSI, visit www.gsinsider.com.

Below is summarized Paul and Bill's top 10 list on where deal problems usually arise:

  1. Differences in valuation expectation linger deep into negotiation. While seller may have agreed to a certain price and terms in the LOI, they did so without a strong conviction that such a price truly represented the company's worth. When detailed terms emerge in negotiations that erode the ability for seller to truly realize such value, seller may summarily walk from the transaction.
  2. Non-disclosure of material items at the appropriate time. When seller and buyer purposely hide — or do not fully disclose — critical facts about their company, the transaction or post-deal desires, the sudden discovery of these facts tends to create mistrust that spoils negotiation.

For the entire article go to the Events page at www.minutemanventures.com. Click here.

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Understanding the Private Equity Buyer of Federal Services Companies

Where once they were rare, private equity firms continue as active buyers and investors in government services companies. Highly disciplined by definition, private equity funds have made extraordinary gains from investment in the sector — witness the Veridian, AverStar, Anteon and RCI stories.

Unlike strategic buyers, private equity funds will often share in ownership after the transaction with existing management of the acquired firm, making their assessment of the company in advance critical criteria.

David Ehrenfest Steinglass, Managing Director of American Capital Strategies, leads the firm's government services investing efforts. Among his achievements have been the successful buyout and re-sale of Weston Solutions, an environmental services firm. American Capital Strategies, Ltd. (Nasdaq: ACAS) is a publicly traded buyout and mezzanine fund with capital resources of approximately $5.4 billion.

He writes below on some of the defining aspects of private equity buyers as buyers in the government services sector.

From the perspective of a potential financial buyer, there are several vitally important questions we consider in evaluating whether to buy a government services firm. Some of these questions are relevant no matter the industry the potential target company operates in; others are specific to the government services market.

This article attempts to frame the key questions in each category from that financial buyer's perspective; strategic buyers will ask a different set of questions. More specifically, a financial buyer is concerned with how the business has and will continue to perform left on its own; strategic buyers are by definition considering how the target company will fit into, complement and augment an existing business or businesses.

The internal and external dynamics of a target investment are vitally important to the financial buyer; to the strategic buyer, they may be secondary to the benefits of a combination. It goes without saying, therefore, that a financial buyer is interested in current management as partners post-closing, while a strategic buyer may or may not consider incumbent management redundant in combination with its own management team.

Having done that, the article then attempts to look at these questions from the seller's perspective.


Investing in Government Services

A financial buyer typically looks to understand several major categories of issues in evaluating a potential investment:

  • What is motivating the seller to sell?
  • What value does the seller bring to the business (strategy, customers, operations, culture, other) and will s/he or they continue to add value post-acquisition?
  • Who are the successors to key management positions, what are their current roles and what is the timing on succession? Alternatively, if there are not obvious successors, how feasible is it that we will be able to recruit a successor or successors?
  • Why do customers buy from this company?
  • How does this company compete and what can its competitors (or the target company) do to change the basis of competition?

A financial buyer looking at a government services firm will, in addition to the questions above, consider the following:

  • Does the company benefit from any government set-asides (small business, minority/women-owned business, etc) and what implications will a transaction have on that special status?
  • Within each client agency, who are the decision-makers and what are their likely future lives within those agencies?
  • Within each client agency, what are the procurement trends and contract vehicles?
  • What opportunities exist to sell into different agencies, leveraging relationships and formal qualifications and experience within current client agencies?

From a seller's perspective, many of these questions come down to people and to the first tier managers that report to the CEO.

Assuming the financial performance of the firm is attractive to a group of potential buyers, those buyers will begin to focus on (a) the sustainability of the base business and (b) the opportunities to grow that base business. Most buyers assume that the seller(s) is/are likely to not continue to play the vital role s/he or they have played pre-closing, and so will focus a lot of attention on the next generation of leadership around these two issues.

Having an identified and capable cadre of managers able to step up into greater responsibility and already performing at a higher level is a critical success factor in consummating a successful sale. This means that prior to a sale process, some transition of client relationship and service delivery management needs to happen.

This transition needs to be visible both externally (clients, competitors, sub-contractors) and internally (throughout the organization these new leaders need to be recognized, and need to comport themselves, as the future managers of the company). If this transition is undertaken prior to the commencement of a sale process, the buyer will pay more because the risk of the transition is shared.

Waiting until a deal is in the works runs the risk that a buyer will be skeptical of the new leaders as "window dressing" for the sale process. One consequence of that, beyond a lower price, is that the terms of the deal will be more contingent, cash will be slower to change hands, and much energy will be expended between the parties in conversation about how to ensure that the current, selling leaders stay in place post- closing.

Mr. Ehrenfest Steinglass, based in Bethesda, Md, can be reached at 301-841-1360 and David.Steinglass@AmericanCapital.com. This is a copyrighted article written by Mr. Steinglass.

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Federal M&A Musings

New IPO on the docket. Reston, Va. government services provider NCI Information Systems, Inc. registered with the Securities and Exchange Commission on July 29 to sell up to $75 million of stock in an initial public offering.

With the dearth of IPOs in the sector over the last two years, this is welcome news. Several of the sector stalwarts — such as PEC Solutions, Titan, Veridian and DigitalNet, have been taken private due to larger firm buy-outs, with no new IPOs to replace them. With M&A pricing hovering near IPO valuations and the specter of Sarbanes-Oxley compliance hanging over the IPO wanabees, one can understand the reluctance to bear all in the public markets.

NCI has more than 1,400 employees doing defense and civilian work. Key clients include DoD organizations — the U.S. Air Force and Army, the Defense Logistics Agency, and the National Guard Bureau — plus civilian federal governmental organizations — the Departments of Energy and of the Interior, the General Services Administration, the Environmental Protection Agency, NASA, and the National Science Foundation.

NCI founder Charles Narang signaled that the public market may have been his goal when he hired Mike Solley to become President late in 2003. Solley previously held leadership posts at public federal companies Nichols Research and MTC Technologies. For more on the company see www.nciinc.com.

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The Federal Deal

FGR offers analysis of a recent M&A transaction 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@infobasepub.com ).


QinetiQ to acquire Apogen Technologies

QinetiQ Ltd. signed an agreement to acquire privately held Apogen Technologies, Inc., a top 50 federal contractor, from private equity firm Arlington Capital Partners.

Springfield, Va.-based Apogen Technologies provides technology solutions to government entities to address complex, mission critical challenges of national significance. The company has areas of expertise which include enterprise architecture, network services and operations, software and applications development, web-based computer system development and integration, engineering and environmental services, and management and technical support services. Current customers include: U.S. Department of Homeland Security, U.S. Department of Agriculture, U.S. Census Bureau, U.S. Customs and Border Protection, U.S. Department of Defense, U.S. Department of Energy, Internal Revenue Service, and the U.S. Navy.


TERMS

On Aug. 3, 2005 QinetiQ announced it had entered into an agreement to acquire Apogen Technologies. The purchase price is $288 million in cash.

Upon regulatory approval, Apogen will become a wholly-owned subsidiary of QinetiQ North America, remaining autonomous and retaining the Apogen name, management team, and entire employee staff.

The merger is expected to close in September, pending government approvals.

Apogen had 2004 revenues of $205.1 million.


ANALYSIS

Quick, what's the fastest growing British defense firm in North America?

If you answered "BAE Systems", you'd only be half right. Sure, BAE has closed just about $5 billion worth of U.S. acquisitions during the past 12 months. The company's four U.S. acquisitions, headlined by the $4.2 billion acquisition of United Defense Industries, have added $2.8 billion to its revenues base. No other foreign-based company is ever likely to touch those numbers.

Those deals have served to increase the size of BAE Systems North America (er, BAE Systems, Inc.) by about 50 percent in just one year. But as respectable as that growth rate is, it's beggared by the growth in the United States of QinetiQ Ltd. — an upstart company whose employees were only a few years ago toiling away as civil servants of the British government. During the past twelve months QinetiQ's U.S. revenues have gone from undetectable to — with this latest acquisition — $600 million. Amazing what ownership by the right U.S. private equity concern can do for you. (Collect call for Chancellor Schröder…)

Not that QinetiQ is leaning too heavily on its Carlyle Group affiliation, or even on the "Special Relationship" between the U.S. and Britain. A good place to start this discussion is again with a comparison with BAE Systems. It's been years since BAE Systems stopped talking about being considered equal to its U.S. peers, and just started acting equal. One telling sign of how "at home" BAE Systems is in the U.S. marketplace: the fact that the ink had hardly dried on its buy of United Defense Industries — its first "platforms" buy on this continent — before it had confidently swept away the United Defense name, and rebranded the whole shebang as "BAE Systems."

Not so QinetiQ. The company is at pains to explain that with this, the largest of its four U.S. buys, Apogen will "remain autonomous and retain the Apogen name, management team, and entire employee staff." (We think that's short-sighted, because somewhere out there is a bio-tech startup willing to pay good money for rights to the "Apogen" name.)

And, humor aside, there are good reasons for QinetiQ to be playing it safe. After all, it's still majority owned by a foreign government's defense ministry. But comes the company's IPO (a matter of a few months from now, if recent reports are to be trusted), look out. QinetiQ has a good name, and we'd be surprised if next year it wasn't busy establishing it on these shores.

The manner in which it does so will bear watching. There are some clues in the announcement of the Apogen buy. QinetiQ CEO John Chisholm says that the company has already poured the complete foundation upon which future U.S. deals will be set: "Our strategy in the U.S. is to penetrate the defense and security markets by creating three operating businesses that reflect our main routes to market — through the provision of ground-breaking technology, systems engineering and customer support, and information technology. Recent QinetiQ acquisitions, Foster-Miller and Westar, represent the first two businesses — and Apogen represents the third."

What this will mean, says Sir John, is that the company's "U.S. development from now on will be carried out principally through these companies, both by organic growth and through additional acquisitions." In other words: deals like the Planning Systems, Inc. buy, made through subsidiary Foster-Miller, will become the rule, and not the exception.

That should be just fine with Apogen Technologies chairman Phil Odeen and CEO Todd Stottlemyer. It's been a year and half since the company's last big strategic deal (the $100 million acquisition of Science & Engineering Associates, Inc. (SEA) by ITS Services which created Apogen Technologies). That's a long hiatus for men in a hurry, which is what Messrs. Odeen and Stottlemyer give every appearance of being. Says the latter: "Joining the QinetiQ Group will help us accelerate our growth plans."

Those plans are almost certain to include acquisitions, and we'd note here that there's another advantage for QinetiQ in having its "autonomous" subsidiaries strike their own deals — that this arrangement tends to allow them to make deals which QinetiQ itself might not. But for now the emphasis is on internal growth, and on realizing the synergies which result when you combine a technology-oriented concern like QinetiQ with a company possessing the advanced information technology expertise of Apogen.

And then there are the extraordinary opportunities for technology insertion. QinetiQ has developed an deep reservoir of homeland security technology. Can it be coincidence that the company's name begins with "Q", the moniker of James Bond's technology officer? And more to the point, can it be coincidence that QinetiQ's new acquisition, Apogen, is ranked among the top 10 contractors at the U.S. Dept. of Homeland Security?

We suspect it's not coincidence at all — but that in Sir John Chisholm, QinetiQ has a strategic thinker ready to match wits with any of his peers, be they English, European, or American. The company looks set to follow the trail blazed by BAE Systems into the vital heart of the U.S defense industrial base.

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Contract Central

FGR presents briefs on selected technology services contracts awarded by the U.S. government to 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 infobasepub.com.


Army AMCOM Chooses King Aerospace to Maintain RC-7 Turboprop Aircraft

The U.S. Army Aviation and Missile Command, PEO for Aviation (AMCOM) (Huntsville, AL) awarded King Aerospace, Inc. (Addison, TX) a 10-year, $223.9 million, firm-fixed-price and cost-reimbursement contract (W58RGZ-05-C-0302) for Life Cycle Contractor Support (LCCS) of RC-7 Airborne Reconnaissance - Low (ARL) aircraft.

Under the contract, the company will perform maintenance services, logistical support, and management processes to maintain nine each RC-7s, which are DeHavilland Dash 7 (DHC -7) turboprop aircraft specially outfitted with equipment to facilitate the ARL program's mission of communications intelligence (COMINT) collection, imagery intelligence (IMINT) collection, and designated area surveillance.

The contract was competitively procured through solicitation W58RGZ-04-R-0524, which was issued on May 14, 2004, and called for competition limited to small businesses only (NAICS 336411). Proposals were due on August 3, 2004. A total of three offers were received.

The procurement is considered a follow-on effort. The incumbent was Avtel Services, Inc. (Mojave, CA), which performed the work previously under a five-year, $66.1 million contract (DAAH23-00-C-0029) awarded in December 1999.


DCC-W Taps Four for Lot 1 of Army IMCEN Desktop Support Program

Brief:

Tthe U.S. Defense Contracting Command - Washington (DCC- W) (Washington, DC) awarded four seven-year, IDIQ contracts, worth $450 million collectively, to provide Applications Development support for the Headquarters Dept. of the Army (HQDA) Information Management Support Center (IMCEN). The awards represent Lot 1 of the Army Desktop Support Services procurement. The recipients were:

— BAE Systems Information Technology (BAE-IT) (McLean, VA), which was awarded a $206.9 million contract (W74V8H-05-D-0006).

— FCBS, Inc. (Springfield, VA), which was awarded a $212.8 million contract (W74V8H-05-D-0020).

— Serco Services, Inc. (Vienna, VA), which was awarded a $212.7 million contract (W74V8H-05-D-0005).

— Titan Corp., Enterprise Services & Solutions Sector - Enterprise Management Solutions (Reston, VA), which was awarded a $204.7 million contract (W74V8H-05-D-0004). Titan's subcontractors include AlphaInsight, CYIOS, Netcentrics, Lockheed Martin Information Technology (LMIT) (Seabrook, MD), NCI Information Systems, Inc. (Reston, VA), CACI, Inc. - Federal (Arlington, VA), Hewlett Packard Co., Government Business Unit (Rockville, MD), Remedy, TEKSystems, Preferred Systems Solutions, Inc. (PSS) (Fairfax, VA), TSM Corp. (Bartlett, TN), and Norbeck.

DCC-W first awarded Titan a single-award, six-year, $217.3 million contract (W74V8H-04-D-0037) for Lot 1 in February 2004, but losing bidder Resource Consultants, Inc. (RCI) (Vienna, VA) — now Serco Services — filed a protest. Despite the fact that the U.S. General Accountability Office (GAO) denied RCI's protest in March 2005, the Army revamped its acquisition plan, re-evaluated the proposals, and this time, made multiple awards for Lot 1.

Under the multiple-award program, these companies will compete for $450 million in task orders to provide information technology (IT) support services for enterprise-wide desktop services, including service desk services, installation services, system analysis and architecture, messaging services, system administration, server and web server management, configuration management, video teleconferencing services, technical logistics support and information assurance.

The contracts were competitively procured through solicitation DASW01-03-R-0040, which was issued on May 23, 2003, and called for full & open competition in six lots. Several awards were reserved for small businesses or 8(a) firms only (NAICS 541513).


MDA Names Advanced Product Transitions Corp. to Create BMDS Industrial Partnership

The U.S. Missile Defense Agency (MDA) (Arlington, VA) awarded Advanced Product Transitions Corp. (ADT) (McLean, VA) a five-year, $251.1 million, cost-plus-fixed-fee IDIQ contract (HQ0006-05-D-0007, 0001-0006) for a Producibility and Manufacturing Technology Industrial Partnership.

Under the contract, the company will establish, provide, operate, and manage a partnership of Ballistic Missile Defense System (BMDS) industry prime contractors, lower tier suppliers, and small businesses to address manufacturing, producibility, and industrial base issues impacting BMDS development and deployment. Technical projects, which are developmental in nature, pursued under the Industrial Partnership include electro optics/infra-red (EO/IR), radiation- hardened electronics and components, advanced materials and structures, power systems, radar and radio frequency and propulsion. The work will be performed primarily in Arlington, VA.

The contract contains a two-year base (worth $50.9 million) and three one-year options that, if exercised, could increase its total cumulative value to $251.1 million and extend the period of performance through July 2010. The first task order is valued at approximately $5 million to $7 million. The base period will use FY05 and FY06 research, development, test & evaluation (RDT&E) funds. Contract funds will not expire at the end of the current fiscal year.

The contract was competitively procured through solicitation HQ0006-04-R-0007, which was issued on February 28, 2005, and called for full & open competition (NAICS 541710). Proposals were due on April 15, 2005.


Navy FISC Inks Applied Global Technologies to Run Video Teletraining Network

The U.S. Navy Fleet Industrial Supply Center Norfolk, Philadelphia Detachment (FISC) (Philadelphia, PA) awarded Applied Global Technologies (Rockledge, FL) a four-year, $20 million, firm-fixed-price contract (N00140-05-C-0075) for Navy/Marine Corps video teletraining network services.

Under the contract, the company will support the the Naval Education and Training Command (NETC) (Pensacola, FL) by providing hardware and software, management of equipment and personnel services, systems engineering, scheduling, promotions, training and maintenance of the Navy-Marine Corps Video Teletraining Program (VTT). The VTT program is a multi-point network capable of 384 KBPS data rate, full duplex video/audio and graphics to provide formal Navy and Marine Corps training courses to multiple classrooms simultaneously. The network currently utilizes five hubs connecting 97 classrooms to areas as remote as Okinawa, Japan to educate 24,000 students per year.

The contract contains a one-year base and three one-year options that, if exercised, could increase its total cumulative value to $20 million and extend the period of performance through September 30, 2009.

"Our superior performance ratings over the past five years reflects the dedication of AGT's professional and specialized on- site personnel," stated Michael Valletutti, CEO, Applied Global Technologies. "This program is an enormous effort that incorporates multiple data centers, disparate networks, scheduling software, course content, digital recording, technology management and high-touch services. We've developed a proven methodology that leads to increased utilization and cost savings — the Navy has reported that they receive a 100% return on their investment with AGT's managed services."


Navy FISC Picks Aquasis in Small Business Recompete to Support TRAWING FIVE

The U.S. Navy Fleet Industrial Supply Center Norfolk, Philadelphia Detachment (FISC) (Philadelphia, PA) awarded Aquasis Services, Inc. (Pensacola, FL) a 27-month, $5.8 million, firm-fixed-price contract (N00140-05-C-0073) to provide administrative support services for Training Air Wing (TRAWING) Five (TW 5) located at Naval Air Station (NAS) Whiting Field (Milton, FL).

Under the contract, which will begin on July 1, 2005, the company will perform services that include operation of the centralized portion of the activity's mail, file, correspondence, and directives functions, and exercise technical coordination of such functions throughout the activity; develop local policy and procedures for safeguarding classified material and monitor compliance; control message receipt and distribution; maintain all phases of aviation record-keeping and scheduling systems for students and instructors.

The contract was competitively procured through solicitation N00140-04-R-0008, which was issued on May 13, 2004, and called for competition limited to small businesses only (NAICS 561110; $6 million). Proposals were due on June 16, 2004.


NAWCAD Taps Geneva Aerospace for R&D of UAV C3 Systems

The U.S. Naval Air Warfare Center-Aircraft Div. (NAWCAD) (Lakehurst, NJ) awarded Geneva Aerospace, Inc. (Carrollton, TX) a not-to-exceed $25 million ID/IQ contract (N68335-05-D -0013) for a Phase III Small Business Innovative Research (SBIR) Project under Topic N03-058 entitled "Advanced Ship/ Fixed-wing Unmanned Aerial Vehicle Recovery Interface" and Defense Advanced Research Projects Agency (DARPA) Topic SB021-011 entitled "Multi-Modal Control for Automatic Vehicle Management Systems."

Efforts to be provided include research and development (R&D), prototype and testing of the autonomous control technology, new unmanned vehicle systems and common command, control and communication (C3) systems architectures for unmanned systems.

Work will be performed in Carrollton, TX, and is expected to be completed in June 2010. Contract funds will not expire at the end of the current fiscal year.

This contract was competitively procured using an SBIR Program Solicitation under Topic N03-058 and DARPA Topic SB021-011; 14 offers were received for Topic N03-058 and 12 offers were received for Topic SB021-011.


SPAWAR HQ Taps Progeny Systems for Engineering Services for Maritime Surveillance Vehicle

The U.S. Space and Naval Warfare Systems Command, Headquarters (SPAWAR HQ) (San Diego, CA) awarded Progeny Systems Corp. (Manassas, VA) a $5.9 million cost-plus-award- fee contract (N00039-05-C-0011) for engineering services for the development of technology associated with an expendable array installation vehicle for maritime surveillance systems.

Work will be performed in San Diego, CA (99%) and Alameda, CA, (1%) and is expected to be completed by May 2008. Contract funds will not expire at the end of the current fiscal year.

The contract was not competitively procured. It is a Small Business Innovative Research (SBIR) Phase 3 follow-on contract.


USAF ASC Inks Incumbent Pyramid Services for O&M of Air Force Plant 42 in Palmdale

The U.S. Air Force Aeronautical Systems Center (ASC) (Wright- Patterson AFB, OH) awarded Pyramid Services, Inc. (Alamogordo, NM) a five-year, $84.5 million, fixed-price- award-fee contract (F33657-05-C-6350) for operations and maintenance (O&M) services at Air Force Plant (AFP) 42, in Palmdale, CA.

Under the contract, the company will employ more than 80 people in providing qualified personnel, program/business management staff, services, and equipment to accomplish total contractor operation of AFB 42 common areas. These services include fire protection, aircraft rescue and fire fighting, emergency medical response, installation security, maintenance, refuse collection and disposal, information technology (IT) and telecommunications, and contract administration services. The work will be performed at AFB 42, Palmdale, CA.

AFB 42 is a government-owned, contractor-operated (GOCO) facility consisting of eight separate production sites sharing a common runway complex, consisting of two 12,000 ft. runways on 5,800 acres of property. It is one of nine Air Force Industrial Plants located throughout the United States.

Combined with its proximity to the concentration of aerospace industry in Los Angeles and the high-speed corridors of the Air Force Flight Test Center (AFFTC) (Edwards AFB, CA), the installation is uniquely situated to fully support the newest and most advanced commercial and military aerospace systems.

The contract was competitively procured through solicitation FA8623-04-R-6350, which was issued in December 13, 2004, and called for competition limited to small businesses only (NAICS 561210; $30 million). Proposals were due on January 31, 2005.


USAF OO-ALC Chooses 10 Companies for $1.9 Billion DESP II

The U.S. Air Force Ogden Air Logistics Center (OO-ALC) (Hill AFB, UT) awarded 10 parallel, five-year, IDIQ contracts, worth $1.9 billion collectively, for the Design and Engineering Support Program (DESP II).

The recipients were:

— Aerospace Engineering Spectrum (AES) (Ogden, UT) (FA8222-05-D-0001). The company, which spent an estimated $100,000 putting together its bid, is a seven-year-old joint venture consortium of Select Engineering Services (Ogden, UT), Total Quality Systems, Inc. (TQS) (South Ogden, UT), Aerospace Engineering & Support (Ogden, UT), and E- Spectrum, Inc. (San Antonio, TX).

— ARINC Engineering Services, LLC (Annapolis, MD) (FA8222-05-D-0002).

— Battelle Memorial Institute, National Security Div. (Columbus, OH) (FA8222-05-D-0003).

— Dynamics Research Corp. (DRC) (Midwest City, OK) (FA8222-05-D-0004).

— Jacobs Sverdrup (Tullahoma, TN) (FA8222-05-D -0005).

— Karta Technologies, Inc. (San Antonio, TX) (FA8222 -05-D-0006), whose team of subcontractors consists of nine small businesses, 11 large corporations, and six public partners.

— Manufacturing Technology, Inc. (MTI) (Ft. Walton Beach, FL) (FA8222-05-D-0007).

— Northrop Grumman Mission Systems - Information & Technical Solutions Div. (I&TSD) (Fairfax, VA) (FA8222-05-D -0008).

— Southwest Research Institute (SwRI) (San Antonio, TX) (FA8222-05-D-0009).

— Support Systems Associates, Inc. (SSAI) (Melbourne, FL) (FA8222-05-D-0010).

Under the multiple-award program, these companies now will compete for $1.9 billion in task orders, which will cover engineering and technical services to support all weapon systems, subsystems, and related processes that are under the cognizance of the Air Force Material Command (AFMC). Task orders will address technical areas such as: Laboratory Services, Technical Documentation, Courseware Development, Systems Design, Engineering, Development, software/ Firmware, Maintenance, Repair, Operational Support, Process Modeling, Analysis, Re-Engineering, Environmental, Health, and Safety.

The DESP program was created from the merger of the best elements of the previous Design Engineering Program II (DEP II) and Technology Task Order Engineering Services (TTOES) program. The concept works on the principle of having a separate designer and manufacturer. It opens the door to companies with high level design expertise, engineering support services, and minimal production capability, as well as to manufacturing houses with little design capability. The concept removes the conflict of interest between design and production biases (i.e., having a contractor push the more expensive of two technically satisfactory designs).

The goal of DESP Air Force is to procure engineering and high level technical services in support of all AFMC weapon systems, components, and support equipment. The program's primary focus is on the insertion of proven technologies and methods into Air Force systems and processes.

Although the DESP program targets AFMC weapons systems and requirements, it is also available for the use of agencies throughout the Dept. of Defense and the federal government. No fee is charged to AFMC users, but minimal fees may be negotiated on a case-by-case basis with outside agencies.

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Deals of the Month

Closing/
announcement date
Buyer Seller Purchase Price Seller Revenue
August 3, 2005 QinetiQ Apogen Technologies, Inc. $300m $205m
August 1, 2005 QinetiQ/Foster-Miller Planning Systems, Inc. $42m $44.6m
July 19, 2005 Perot Systems PrSM Corp. $7.2m $7.6m
July 14, 2005 VeriSign iDEFENSE $40m N/D
June 30, 2005 Indus Corp. Halifax (secure networking div.) N/D $13.6m
June 30, 2005 Indus Corp. AB Floyd N/D $14m

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Minuteman Ventures LLC News

Minuteman Ventures recently was engaged by a federal contacting client in San Diego, CA, a $15–25 million company in DoD markets. Interested parties in the San Diego firm should call Paul Serotkin in the Boston area office at 781-750-8065… Mark your calendars for Sept. 25–27 in Williamsburg, Va., the annual conference of the Professional Services Council. As always, leaders from small, mid-tier and large companies in the federal services industry will be there to debate and discuss issues affecting the sector. For more, click hereAlso check out the annual mid-year meeting October 12–13 of the Contract Services Association (CSA) in Washington, D.C. The CSA also deals with pressing issues to government services contractors, with emphasis more on those firms providing facilities management, logistics services and base operations for federal customers. For more, click here.

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*Note

The Minuteman Federal Deal Meter covers M&A transactions of services firms principally serving federal agencies.

Transactions covered are those announced between January 1, 2005 through July 31, 2005.

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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 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 and product solutions to federal government clients. We pride ourselves in being the investment bank for entrepreneurial companies in the federal sector.

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