It’s always a good time to review and highlight the ever-dynamic array of mergers and acquisitions in GOVCON. These acquisitions expand existing capabilities and add footprints in new customer markets. This is NOT intended to be a comprehensive list of all acquisitions, but instead a sample of ones we found interesting, and some illustrate major developments in the GOVCON market.
In December 2022, Advent agreed to purchase Maxar in an all-cash transaction worth approximately $6.4 billion. Maxar is a provider of space solutions and geospatial intelligence and currently has more than 90 satellites in orbit providing communications, imagery, and data to customers including the U.S. government and Intelsat. The acquisition takes Maxar private and is expected to help accelerate its next-generation satellite development program. Advent and Maxar anticipate the proposed transaction to close in late April or May of 2023, subject to satisfaction or waiver of all other closing conditions.
In December 2022, IBM announced plans to acquire Octo from Arlington Capital Partners. Octo is an IT modernization and digital transformation services provider exclusively serving the U.S. federal government, including the U.S. Department of Veterans Affairs (VA), U.S. Department of Health and Human Services (HHS), and U.S. Department of Defense (DoD). The acquisition adds 1,500 employees to IBM Consulting’s U.S. public and federal market organization. It also adds oLabs, Octo’s 14,000 square foot innovation center with in-house computing capability to expand IBM’s ability to work collaboratively with federal agencies to rapidly prototype emerging technology solutions.
IBM has been in a lull in terms of significant prime contract wins over the last several years. It is very likely that IBM made this acquisition to re-invigorate its GOVCON portfolio.
In December 2022, L3Harris signed a definitive agreement to acquire Aerojet Rocketdyne, which specializes in propulsion systems and energetics, for approximately $4.7 billion. Aerojet is the largest remaining independent supplier of liquid and solid-fuel rocket motors and will grow L3Harris’ role as a merchant supplier to industry peers. In March 2023, the Federal Trade Commission (FTC) sent a “second request” for more information to ensure the proposed acquisition does not reduce competition in the defense industry, so the acquisition has not yet closed.
Aerojet Rocketdyne continues to find some way to get acquired and they were pursued by multiple buyers after the failed sale to Lockheed Martin.
In January 2023, L3Harris closed the acquisition of Viasat Inc.’s Tactical Data Links product line, known as Link 16, for approximately $1.96 billion. This includes the Multifunctional Information Distribution System (MIDS) platforms and associated next-generation Link 16 terminals and handheld radios, as well as the Link 16 to space business.
In December 2022, LMI acquired Synaptech, a supplier of artificial intelligence (AI), software and operational analysis services. Synaptech will help LMI in its mission of “growing market access” in the space sector through its existing presence at U.S. Space Force and modeling and simulation capabilities. The acquisition also adds Synaptech’s Rapid Analysis and Prototyping Toolkit for Resiliency (RAPTR), a proprietary software providing a scalable architecture for modeling, simulation, analysis and visualization for the space warfighting domain, as well as cross-domain warfare integration.
IPKeys Power Partners
In April 2023, Parsons completed its acquisition of IPKeys Power Partners, a provider of enterprise software platform solutions currently delivering cyber and operational security to hundreds of electric, water and gas utilities across North America. The transaction is valued at $43 million. IPKeys will be integrated into Parsons’ Connected Communities business unit and, specifically, the Parsons X digital accelerator organization. The acquisition expands Parsons’ presence in grid modernization and cyber resiliency for critical infrastructure and is directly aligned with the Infrastructure Investment and Jobs Act (IIJA). The IIJA is expected to expand the grid modernization and cyber resiliency markets as the digitalization of infrastructure accelerates and presents an increased cyber risk.
Native-Owned Businesses Want to M&A, too!
A few native-owned GOVCON competitors have made significant acquisitions to expand their capabilities and accelerate growth. A few examples of this trend include:
|Buyer||Acquired||What did they acquire?||Announcement or closed in…|
|ASRC Federal||Broadleaf||Broadleaf is a 600 person strong business with cybersecurity, network engineering and cloud migration, training and program management services. This expands customer reach across DoD to include a geographic focus on Aberdeen Proving Grounds.||April 2023|
|Cherokee Federal||Criterion Systems||Criterion is a cybersecurity and IT services company adding more than 450 professionals with expertise in cybersecurity, cloud/data center management, IT infrastructure operations and systems engineering. Criterion serves mission-critical environments and delivers secure architectures and methodologies for government IT modernization efforts.||March 2023|
|ASRC Federal||SAIC’s logistics and supply chain management business||This business adds 240 professionals in ASRC Federal’s base operations support capability which currently provides procurement, logistics and warehousing services at military locations throughout the U.S. The acquisition adds significant depth to ASRC Federal’s work with the Defense Logistics Agency (DLA), the company’s third largest customer by contract spending.||March 2023|
|Chugach Government Solutions (CGS)||VPSI||Vector Planning & Services, Inc. (VPSI) provides technical solutions in cybersecurity and information assurance, systems engineering and acquisition management, and IT and cloud system integration capabilities focused on the federal government. The acquisition will fold into CGS’s Technical Services Division, which focuses on innovations and emerging technologies.||April 2023|
|Akima||Pinnacle Solutions||Pinnacle provides training and sustainment products and services to defense customers worldwide. The company provides aviation operations and maintenance services; flight operations and training services; and develops state-of-the-art training products and services for air, ground, unmanned and maritime platforms. Following the closing of the transaction, Pinnacle will operate as a wholly owned subsidiary of Akima.||April 2023|
The FedSavvy Strategies Takeaway
- Advent and LMI, like many other GOVCON competitors, are making investments to grow their access in the space market in areas like modeling and simulation, satellite development and geospatial intelligence.
- IBM’s acquisition of Octo expands its footprint within the VA, HHS and DoD and adds to its ability to deliver IT modernization services to U.S. federal government customers.
- IBM also gains an innovation capability which can be leveraged to enhance its offerings and a spark to re-vitalize their GOVCON growth efforts.
- L3Harris’ acquisitions of Aerojet and Link 16 improve its position to provide networking and resiliency for defense customers, especially as the company continues to focus its efforts on developing JADC2 solutions.
- Aerojet’s expertise in propulsion also creates exposure to new growth markets in munitions, space exploration and hypersonics.
- Parsons’ acquisition of IPKeys allows it to step into new, growing markets such as the grid modernization and cyber resiliency for critical infrastructure markets.
- Native owned businesses are spending their money to not just create new 8(a) entities to continue established business, but instead they are buying customer access and technical capabilities to mirror the M&A strategy embraced by their non-native peer companies.
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