In recent years, the National Security Agency (“NSA”) market has been an acquisition hot spot, as large contractors attempt to re- position their contract portfolio into the faster growing segments of federal spending. The pace of acquisitions accelerated in early 2010 following the creation of the U.S. Cyber Command (USCYBERCOM), especially once it was confirmed that the sub-unified command would be co-located with both the NSA and recently relocated Defense Information Systems Agency (“DISA”) at Ft. Meade. Well-positioned NSA contractors not only offer an acquirer access to the largest U.S intelligence agency, but an entrée into USCYBERCOM, which is commanded by General Keith Alexander, the Director of the NSA.
On January 27, 2013, the Washington Post published an article stating that in late 2012, the Pentagon approved a major expansion of USCYBERCOM, from 900 personnel to approximately 4,900. In the midst of sequestration risk, a continuing resolution, and debt ceiling headlines, such a significant increase in personnel only highlights the significance of the cyber threat to our nation.
According to the Washington Post, the increased personnel at USCYBERCOM will fall into one of three categories:
Because USCYBERCOM is so intertwined with the NSA, we expect this increase to further validate a buyer’s investment thesis on the Fort Meade market. When government personnel increase, contractor dollars typically follow. In the past four years, there have been 26 acquisitions of companies whose primary customer was the NSA. This number peaked in 2011 when there were nine transactions closed, as shown in the below graphic. In 2013 & 2014, we expect that targets focused on the NSA market will
continue to stay at the forefront of strategic buyers’ acquisition criteria.