Transcript of Minuteman Ventures LLC ‘REPORT FROM THE FRONT: Federal/Defense Technology M&A – ‘Who’s...
- Slide 1
- Minuteman Ventures LLC REPORT FROM THE FRONT: Federal/Defense
Technology M&A Whos Buying, Whos Selling, and Why Conference:
Examining the Economic Impact of SBIR and STTR March 18, 2004 Paul
Serotkin
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- Minuteman Ventures LLC Today.. The Federal/Defense Technology
Company Universe Current M&A Environment Seller/Buyer Profiles
M&A Valuation/Deal Pricing in the Federal/Defense Technology
Sector
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- Minuteman Ventures LLC Investment Bank focused entirely on
Federal/Defense Technology Sector Work with private firm owners
approaching M&A as either 1) a first time strategic growth
path, or 2) a liquidity event Founder involved with small business
trade association in effecting passage of SBIR in 1982 Work with
private and public companies in transacting corporate
transactions
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- Minuteman Ventures LLC The Federal/Defense Technology Company
Universe Under $100m in revenue, often under $50m Closely held, few
shareholders, with perhaps an ESOP holding a minority position and
some option-holders; typically no outside capital Geographically
strong in two, possibly three locations Having true market presence
at two to three agencies Widely ranging services, systems and
solutions across a spectrum demarcated by degree of
commoditization, classified/intel work and technology
differentiation - System engineering/integration, training,
modeling/simulation, network services, technology R&D, legacy
migration, database maintenance, logistics, software application
development, program management/acquisition support,
systems/platform systems, IT/communication technology Usually at
least five years old, many times 15+ years duration Founder often
involved, at least in ownership, if not operations Could have some
SBSA/8a work remaining
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- Minuteman Ventures LLC Government Technology Firms- Industry
Stratification, By Revenue, FY02 Source: Eagle Eye
Publishing/Government Services Insider
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- Minuteman Ventures LLC Favorable M&A Environment for
Federal/Defense Technology Firms Supportive Capital markets- $2bn
in new issues last 18 mos.; aggregate 50% increase in03 enterprise
values Inexpensive debt capital, with attractive lending ratios
Government infusing more complex technology into processes and
warfare More outsourced federal functions Public sector firms
valued on basis of 15-20% annual growth Good visibility into future
revenue, earnings and cash flow Modernization of legacy government
IT systems Steady growth in government IT budget strongest in
intel/defense and homeland security LEADING TO: Robust M&A
pricing; market values at/near historic highs
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- Minuteman Ventures LLC Reasons Behind the Robust Government
M&A Market Record levels of Federal/Defense Technology M&A
Transactions. Why? PART FEAR FACTOR, SECTOR MATURITY, CLASSIC MAKE
V. BUY DECISION Sector Rotation Defense in vogue today - Will it be
tomorrow? IPO Buyer Class of 02 will this potential buying class be
smaller in a few years, i.e., Veridian, Titan already sold Active
mid-tier buyers ($50m-$250m); strong private equity interest
(success stories Anteon, SI, Veridian) Well-positioned firms
(intel, security, C4ISR, network-centric warfare, law enforcement,
public safety) yield M&A premium Attractive tech firms
supporting homeland security and 3-letter agencies Large platform
companies diversifying into services Uncertainty in market GWAC
restructuring, small business recertification, performance-based
contracts, base closure, War on Terrorism and deficits affecting
civilian agency budgets
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- Minuteman Ventures LLC Seller Transaction Profile
Defense/Federal Technology (By Seller Size) Observations (70+
transactions since Q4 02) Mostly smaller companies 8 of 10 with
revenue under $50m Ready willingness by large cos. to buy smaller
ones