Here’s the first government services M&A deal of 2018

by Robert J. Terry, Washington Business Journal, January 24, 2018 - Alexandria-based Sentel Corp. has been acquired by publicly held Vectrus Inc. in a $36 million deal that’s the first publicly announced government services M&A arrangement in 2018.

Sentel’s expertise in logistics and supply chain management, engineering and advanced technology solutions and intelligence mission support will advance Vectrus' strategy to be a leader in the physical and digital infrastructure markets, executives said. 

It will also enhance the company's logistics, IT and technical solutions capabilities while expanding its client base, Vectrus CEO Chuck Prow said in a statement. 

Sentel, which employs more than 600, generated revenue of $107 million for the fiscal year ended Sept. 30. Its clients include the U.S. Army, U.S. Navy, the U.S. Air Force, the Federal Aviation Administration, the Internal Revenue Service and intelligence agencies.

Vectrus (NYSE: VEC) was spun off from Tysons-based Exelis in September 2014, months before Florida-based Harris Corp. (NYSE: HRS) made its May 2015 multibillion-dollar acquisition of Exelis. When it was a part of a larger company, the division was unable to grow its IT networks business. After the spinout, Colorado Springs, Colorado-based Vectrus identified IT networks as a major growth area for the company — and moved about 20 employees to Reston in a popular corridor for government contractors.

From its home base in Colorado, Vectrus is in close proximity to key government customers including the North American Aerospace Defense Command (NORAD), the Peterson Air Force Base and the U.S. Air Force Academy.

Vectrus posted 2016 revenue of $1.2 billion.

Last year was an active one for mergers and acquisitions in the government contracting market, fueled by soaring stock valuations, easy access to capital, a hungry private equity investor cohort and a need for companies to expand their capabilities, among other factors.  

The $36 million purchase was funded by cash and Vectrus' credit facility.

Renaissance Strategic Advisors served as strategic adviser to Vectrus and Faegre Baker Daniels served as legal adviser. Sentel was advised by Bluestone Capital Partners, which was recently acquired by Houlihan Lokey's aerospace, defense and government services group. Pillsbury, Winthrop, Shaw, Pittman served as legal adviser to Sentel and BDO USA LLP served as tax adviser.

Original article with multimedia here: https://www.bizjournals.com/washington/news/2018/01/24/here-s-the-first-government-services-m-a-deal-of.html

Release date

Wednesday, January 24, 2018