CACI International is acquiring LGS Innovations and Mastodon Design for a combined $975 million. CACI, a government contractor based in Arlington, Virginia, gains expertise in secure networking, cybersecurity, custom software development, rugged signals intelligence (SIGINT), electronic warfare (EW), and cyber operations products,, the company says.
CACI expects LGS and Mastodon to generate $480 million in revenue and $82 million in EBITDA (earnings before interest, taxes, depreciation and amortization) over the next 12 months. Those figures suggest CACI paid a frothy 11.9 times calendar 2019 EBITDA for the businesses, though we don't figures for 2018 calculations, which would likely be more moderate.
Also, certain tax benefits essentially knock down the purchase price to $835 million, which also reduces the deal's valuation to roughly 10 times annual EBITDA for calendar 2019.
LGS Innovations: Company Background
Private equity firms Madison Dearborn Partners and CoVant Management have owned LGS since 2014. LGS's annual EBITDA (earnings before interest, taxes, depreciation and amortization) grew 8X under the duo's ownership, though actual dollar figures are undisclosed. Earlier, the consulting business was the former federal division of BellLabs.
LGS is well-known for its so-called C4ISR capabilities -- short for Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance. The company has 1,300 employees, including more than 900 scientists and engineers who focus on U.S. national security, defense, and advanced research efforts.
ChannelE2E could not track down additional information about Mastodon Design as of press time.
CACI International: Company Background
The buyer, CACI, provides information solutions and services that support Intelligence, Defense, and Federal Civilian customers. The company has roughly 20,000 employees worldwide.
CACI's revenue was $1.182 billion for the second quarter of fiscal 2019, up 8.6 percent from the corresponding quarter last year, according to figures released today.
Mergers and Acquisitions: Government IT Service Providers
M&A activity involving government IT service providers has been steady, with numerous first-time buyers jumping into the market. Recent deals ChannelE2E has tracked include:
- January 2019: Huntington Ingalls Industries (HII), America’s largest military shipbuilder, acquired Fulcrum IT Services & G2 Inc. for government technology consulting & cybersecurity expertise.
- January 2019: Government IT services provider Concept Plus, a key Oracle partner, acquired Dougherty & Associates (DAI Solutions), a management consulting firm headquartered in Alexandria, Virginia.
- November 2018: Private equity-backed EverWatch acquired Dynamic Engineering Solutions (DES), an IT consulting firm that provides software and systems engineering, cloud and systems administration to government agencies. Financial terms were not disclosed.
- September 2018: Science Applications International Corp. (SAIC) acquired rival Engility for $2.5 billion in stock. The deal created a $6.5 billion IT consulting and professional services firm focused on government agencies.
- May 2018: SAP National Security Services (SAP NS2) acquired government IT systems integrator Technology Management Associates (TMA).
- February 2018: General Dynamics acquired government IT contractor CSRA for $9.6 billion, making it the number two provider of federal IT services.
- February 2018: On Assignment purchased ECS Federal LLC, one of the largest privately-held U.S. government services contractors, for $775 million.
