Aronson Capital Partners is pleased to announce the acquisition of Force 3, Inc. (“Force 3” or the “Company”) by Sirius Computer Solutions, Inc. (“Sirius”), a portfolio company of Kelso & Company. ACP served as the exclusive financial advisor to Force 3 in this transaction.
Founded in 1991, Force 3 is recognized across the federal sector as a leading cyber security and networking solutions provider. With approximately 170 employees and $260 million in annual revenue, Force 3 will strengthen Sirius’ solutions portfolio in the areas of information security, software-defined networking, secure collaboration, enterprise networking, and data center solutions. Mike Greaney, Force 3 CEO, remarked, “Combining forces with Sirius helps Force 3 take the next step in accelerating our vision. Together, we will extend our geographic reach, solution offerings and networking capabilities in an industry that is very dynamic and fast-paced.”
Sirius Computer Solutions was founded in 1980 and is headquartered in San Antonio, TX. It has approximately 1,700 employees and more than 5,000 active clients across the United States. As a national IT solution provider, Sirius partners with many of the same strategic technology leaders as Force 3, including Cisco, Citrix, Dell, EMC, NetApp, Palo Alto, Splunk, VMware – and is also IBM’s largest solutions provider worldwide. Sirius was acquired by Kelso & Company, a New York City based private equity firm, in 2015.
We believe this transaction illustrates several key trends in the government technology market:
Aronson Capital Partners has served as a trusted strategic advisor for Force 3 for many years and has helped the Company navigate its growth strategy. Force 3 CEO Mike Greaney commented, “The Aronson team provided senior level thought leadership from start to finish and identified a large, commercially focused strategic buyer that will allow us to accelerate our growth strategy. Aronson’s insights, experience, and hands on style were invaluable to our success”.
Harris Corp. is buying Exelis in a $4.75 billion cash and stock deal that the company is calling transformational.
The deal will significantly increase the size of Harris, adding $3.25 billion in revenue to Harris’ $5 billion in revenue. Headcount will grow to 13,000 to 23,000. The transaction is expected to close by June.
Adding scale was definitely one of the factors the drove the deal, according to Harris executives and industry analysts.
“The combination of the two companies’ highly complementary core franchises creates a competitively stronger company with significantly greater scale,” said Harris CEO and chairman William Brown.
Much of that scale will come in the defense market, where Harris adds Exelis’ strong position to its own. Sixty-one percent of Exelis customer base comes from defense customers. About 75 percent of Harris’ revenue is DOD and intell related.
Exelis and Harris also both have significant international and commercial sectors. Pre-acquisition, the
The majority of the completed Government Services transactions involve targets with annual revenue of less than $50M. This sector is incredibly fragmented, largely due to the government’s preferential awards, and it usually takes significant reinvestment and commitment of the shareholders to grow their business beyond this threshold. Therefore, most transactions involve targets with a contract portfolio comprised of (i) prime, F&O work; (ii) prime, small business set aside (“SBSA”) contracts or other preferential awards; and (iii) subcontracts.
We are often asked if it is easier to market and sell a business with prime, SBSA contracts or subcontractor work. Unfortunately, the answer is not clear-cut and is largely case specific based on the target company’s solutions and relationships.
All things being equal, a target with prime, F&O contracts will command greater buyer interest and a higher valuation than a firm with SBSA contracts and subcontractor work. These targets have proven that they can compete and win against the larger primes, which validates their future growth prospects, capabilities, customer relationships and competitive positioning. Moreover, there
FireEye’s $1.0B acquisition of Mandiant marked the 2nd cyber security transaction in the past four months with a publicly disclosed valuation in excess of 9.0x TTM revenue. However, unlike Sourcefire, which Cisco Systems acquired in October 2013, Mandiant has more extensive ties back to the federal sector and a greater composition of services work (vs. products). Therefore, it is more relevant to take a detailed look into the drivers of this valuation and the implications for the government contracting community.
Mandiant was founded in 2004 and is the undisputed leader in security incident response management. The company received significant publicity in February 2013 after it published a report directly implicating China in recent cyber espionage attacks. However, prior to its publicized reports, the company was recognized across the cyber security community as the “Navy seal team” of cyber security breaches, and had secured equity investments from prominent private equity firms Kleiner Perkins Caufield & Byers and One Equity Partners LLC. Mandiant