Los Angeles
Boston
Washington



Volume 6, Issue 2 June 2008





Welcome to the Federal Growth Report (FGR), the newsletter published by Venture Management, Inc. Venture Management and Minuteman Ventures recently merged and are operating under the VMI brand. The combined firm will continue to provide M&A advisory services to federal contractors serving defense, aerospace, intelligence, homeland security and civilian sectors. Our clients include public and privately held corporations, as well as their investors and lead executives. We feel strongly that this combination provides clients with broader national coverage and deepens our presence in the federal contracting sector.

Historically published as a Minuteman Ventures newsletter, Venture Management will continue to publish the FGR, bringing to clients and interested parties current news about the federal M&A marketplace

So, welcome to the NEW Venture Management. We hope you will find the merged team stronger and even more adapted to the needs of the market!

Regards,

Mark Shappee
Paul Serotkin
Venture Management, Inc.


Archives

April 2008

February 2008

December 2007




Join our mailing list!
 
In This Issue
 
Deal of the Month - Cobham plc completes acquisition of Sparta, Inc.
Competitive Strategy Study of Professional Service Firms
Daily Deals - The 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 Federal Deal Meter
  Purchase price  
  Under $50m $50–100m Over $100m Total Deals
YTD 2008 17 7 7 31
2007 23 6 5 34


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 June 12, 2008, and the corresponding period in 2007.

For the list of M&A transactions closed in the sector through June 12, 2008 and 2007, email paul@venturemanagement.com.


Deal of the Month

Cobham plc completes acquisition of Sparta, Inc.

FGR offers analysis of M&A transactions involving government contractors. The analysis is written by Stuart McCutchan, president and CEO of InfoBase Publishers, Inc. on-line 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.

Cobham plc (LSE: COB.L) completed its acquisition of Sparta, Inc., an employee-owned U.S. company which is SEC registered, but unquoted.

Lake Forest, Calif. based Sparta performs a wide range of scientific, engineering and technical assistance services, both as a prime contractor and subcontractor, primarily for the U.S. military services, other agencies of the U.S. Dept. of Defense (DoD), and the intelligence community.

Sparta analyzes complex technological, strategic and tactical issues necessary to define the requirements for new tactical and strategic weapons and defense systems, including systems for Ballistic Missile Defense (BMD); develops engineering solutions to accommodate conflicting technological, schedule, and budgetary requirements; and assists in the design, integration, evaluation and testing of software and hardware components.

These activities include the development of sophisticated computer simulations, applications software, and functional algorithms depicting aspects of various weapons and defense systems and their operation, and the design, fabrication, and testing of prototype hardware.

Sparta's technology development activities include research and development for laser systems; distributed interactive computer simulations; software development; battle management/command, control, and communications; artificial intelligence; information security; aircraft avionics; test range data acquisition; advanced materials and production technology; and composite materials. Sparta also manufactures composite parts for aircraft, missile systems and automobiles.

Cobham CEO Allan Cook stated:

"[Sparta] is one of the leading companies in areas of critical importance in the provision of US National Security. The strong incumbent management will provide Cobham with an exciting platform for growth in the Systems Engineering and Technical Assistance segment, which is complementary to our existing US intelligence and defense capabilities. This is a major step forward in the implementation of Cobham's technology strategy and the creation of a significant Tier 2 business supplying the US DoD and intelligence markets."

Sparta brings a unique and distinct set of Systems Engineering and Technical Assistance (SETA) capabilities to Cobham, which immediately gains a leading position in a new business segment and the opportunity to leverage capabilities and customer relationships for its existing technologies.

Within Intelligence, Sparta provides a full range of products and services including the planning and direction, collection, processing, analysis and production of information for the U.S. intelligence community. In addition, Sparta provides other intelligence-related services including tools for network and information security and develops protection systems using models and simulations

Within Missile Defense, Sparta provides technical solutions and capabilities including systems engineering, modeling and simulation, test and evaluation, operations and sustainment planning and battle management, primarily to the US Missile Defense Agency. It has had an important role for almost thirty years in the development and deployment of effective U.S. ballistic missile defense systems. Sparta also provides training, testing and evaluation services for U.S. tactical systems, including supportability analysis and training for Unmanned Aircraft Systems programs.

Sparta has leveraged its core capabilities into a number of other markets, including engineering and development of network centric warfare systems, modeling and simulation of space systems and engineering services to a variety of U.S. government customers. The military composites business is well positioned and increases Cobham's ship set value on the F-22 Raptor and F-35 Lightening II.

Merrill Lynch acted as exclusive financial advisor to Sparta in connection with this transaction. Gibson, Dunn & Crutcher, LLP acted as SPARTA's outside legal counsel.

Terms

On June 4, 2008 Cobham announced it had completed its acquisition of Sparta. The cash consideration for Sparta was up to $416 million on a debt and cash free basis, of which $381 million will be payable on completion and satisfied from Cobham's existing cash and debt facilities, with the balance of up to $35 million to be paid over the next three years to holders of unvested options who remain with the company.

Plans for the acquisition were first announced on Jan. 16, 2008. The acquisition, which was subject to regulatory and Sparta shareholder approvals, closed as expected during the second quarter of 2008.

For the year ended December 30, 2006, Sparta generated operating profits of $28.6 million and EBITDA of $34.3 million on revenue of $297.3 million. On September 30, 2007, gross assets were approximately $122.0 million. The total cash consideration represents a multiple of approximately 12.1X 2006 EBITDA. It is expected that the acquisition will be earnings-enhancing in 2008.

Sparta, which is run from Washington D.C., will, after a short period of assimilation and subject to appropriate approvals, become a separate strategic business unit within an expanded North America Cobham Division. During this assimilation phase, Sparta will report to Andy Stevens, Cobham Chief Operating Officer, in accordance with the applicable U.S. Government industrial security regulations.

Sparta's business is primarily focused on classified work. Accordingly, subject to U.S. Government approval, Sparta will operate under an SSA (Special Security Agreement) in conjunction with Cobham's existing classified programs. It is intended that three senior Outside Directors will be appointed to the Board of the SSA. All the outside directors provide assurance on security matters and strategic guidance on defense and market trends.

Sparta employs approximately 1,200 people based across 20 U.S. sites, with principal locations in and around Washington D.C., in Huntsville, Alabama, Southern California and Colorado Springs. A substantial proportion of Sparta's workforce has U.S. security clearances. Sparta's management team will continue to run and grow the strategic business unit after completion of the acquisition.

^ back to top


Competitive Strategy Study of Professional Service Firms

Hinge, the experts in professional services brand marketing, recently released a survey examining how CEOs of professionals services firms can better understand the current competitive environment in their own, and similar, industries. Armed with this data, firm leadership can make more informed strategic choices, compare their marketing activities to their peers, and identify best practices. This survey of 100 CEOs and owners of professional service firms in the mid-Atlantic region will help CEOs and firm marketing professionals better understand the current competitive environment. As there is a strong contribution from federal contractor CEOs, we thought our readership would be interested.

Topics Surveyed:

  • Marketplace challenges
  • Growth prospects
  • Competitive strategies
  • Marketing plans and budgets
  • Factors driving success

Hinge is a Reston, Virginia based strategy and branding firm that specializes in helping professional service firms overcome marketplace challenges and reach their full growth potential. For more information on Hinge and the Survey, contact Dr. Lee Frederiksen, who managed the Study for Hinge, at lwf@pivotalbrands.com or 703-391-8870. To read the survey, click here.

^ back to top


Daily Deals

Closing/
AnnouncementDate
BuyerSellerPurchase PriceSeller Revenue
June 10, 2008 DC Capital Partners Kaseman LLC N/D N/D
June 10, 2008 Stanley, Inc. Oberon Associates, Inc. $170m $80m
June 4, 2008 General Dynamics Corp. HLTH Corp. (ViPS, Inc. subsidiary) $225m $103.1m
June 2, 2008 Ultra Electronics Holdings plc ProLogic, Inc. $50m (+ $16m max.) $50m
May 16, 2008 Carlyle Group Booz Allen Hamilton, Inc. (majority share of Defense Operations $2.54bn $2.7bn
May 13, 2008 Finmeccancica SpA DRS Technologies $5.2 bn $3.295 bn
May 12, 2008 Trace Networks TCP Network Solutions N/D N/D
April 30, 2008 SRA International ERA Corporation N/D 300 employees
April 28, 2008 Lockheed Martin Corporation Eagle Group International N/D 1,350 employees
April 25, 2008 Calibre Systems Maquire-Reeder, Ltd. N/D N/D
April 18, 2008 Raytheon Corporation SI Government Solutions N/D N/D

^ back to top


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

^ back to top


781-750-8065
http://www.venturemanagement.com

HQ: Venture Management, Inc. | 674 County Square Drive | Suite 105 | Ventura | CA | 93003