M&A Special Report: Top 10 deals of the year

Methodology

We asked investment bank Houlihan Lokey Howard and Zukin of McLean, Va., to compile a list of the mergers and acquisitions that closed during 2006. We gave that list to a panel of M&A experts to pick the Top 10 Big Deals of the year. They chose a total of 26 transactions as finalists. During a conference call and further discussions, that list was winnowed to 10.

The deals were evaluated based on factors including size, impact on the company making the deal and impact on the market.

Our panel of experts:

John Allen, BB&T Capital Markets/Windsor Group

Don Blair, Raymond James and Associates

Larry Davis, Aronson Capital Partners

William Farmer, Jefferies Quarterdeck

Kerry Hall, Grant Thornton

Bob Kipps, Houlihan Lokey Howard and Zukin

Mark Moore, M&T Bank

Tom Peltier, Stifel Nicolaus

Rob Rubin, National Capital Companies

Paul Serotkin, Minuteman Ventures LLC.

Larry Yanowitch, Morrison & Foerster

1 Buyer: General Dynamics Corp.

Seller: Anteon International Corp.

Gross purchase price: $2.2 billion

Closing date: June 8

Investment bank: Bear Stearns and Co. Inc.

Why it's a big deal: Just the price catches the eye. But this deal is also significant for the boost it gives General Dynamics' information technology business. The Anteon acquisition is part of a pattern for General Dynamics and other defense companies that know they can't survive unless they have a significant IT services business. General Dynamics' IT business brought in about $2.5 billion in 2006, making it the company's largest line of business, and that's only counting about six months of Anteon's revenue.

2 Buyer: Alion Science and Technology Corp.

Seller: Certain assets of Anteon International Corp. from General Dynamics Corp.

Gross purchase price: $225 million

Closing date: June 30

Investment bank: Bear Stearns and Co. Inc.

Why it's a big deal: Alion has become one of the more aggressive companies in the market, closing four deals in 2006. Its ability to complete deals helped it snap up Anteon's program management and engineering services business, which General Dynamics could not keep because of conflict-of-interest concerns. The Anteon buy was the biggest deal in Alion's history and will help the company boost its IT business. Alion's overall business, which includes a substantial amount of science and engineering work, stands at about $750 million a year.

3 Buyer: L-1 Identity Solutions Inc.

Seller: SpecTal LLC

Gross purchase price: $110 million

Closing date: Oct. 19

Investment banks: Longstreet Partners LLC and WWC Capital Group LLC for SpecTal and Jefferies Quarterdeck for L-1

Why it's a big deal: By bringing SpecTal on board, L-1 gained instant access to elusive intelligence agency customers. SpecTal is strong among three-letter agencies -- its key customers include the CIA, Defense Intelligence Agency, National Geospatial-Intelligence Agency and National Reconnaissance Office. SpecTal's consulting services are also a good complement to L-1's biometric business, allowing the company to focus more closely on its customers' needs.

4 Buyer: Netco Government Services Inc.

Seller: Multimax Inc.

Gross purchase price: Not available

Closing date: May 31

Investment bank: BB&T Capital Markets/The Windsor Group

Why it's a big deal: The combination of Netco Government Services and Multimax created a strong company that focuses on enterprise operations, information assurance and systems integration. Backed by the private equity group Cerberus Capital Management LP, the new company, which took the Multimax name, will likely continue to acquire other companies. With revenue of about $300 million, it expects to file for an initial public offering. Company officials said that should happen in the first six months of 2007.

5 Buyer: Stanley Inc.

Seller: Morgan Research Corp.

Gross purchase price: $83 million

Closing date: Feb. 21

Investment bank: Houlihan Lokey Howard and Zukin

Why it's a big deal: Stanley Associates, which partially went public to pay off the debt it took on to make this deal, moved into the bustling Huntsville, Ala., market when it acquired Morgan Research. Stanley now has a strong foothold in Huntsville, which will likely see an influx of business opportunities as several Defense Department functions move to the area as part of recent base realignments and closures.

6 Buyer: Lockheed Martin Corp.

Sellers: Aspen Systems Corp., HMT Vehicles Ltd, ISX Corp., Pacific Architects and Engineers Inc., and Savi Technology Inc.

Gross purchase prices: $92.4 million for Aspen, not available for the others

Close dates: Jan 23 for HMT Vehicles, Jan. 26 for Aspen, July 3 for IXS, Sept. 29 for Pacific Architects and Engineers, and June 8 for Savi

Investment banks: Houlihan Lokey Howard and Zukin for Aspen; BB&T Capital Markets/The Windsor Group and Barrington Investment Partners for Pacific Architects and Engineers

Why it's a big deal: The largest IT company in the government space doesn't need to add to its bulk, so it's concentrating on specialty acquisitions to capture customers and skills. Aspen, for example, gave Lockheed Martin a boost in the business process management business and, after the acquisition, helped the company win a call center contract at the Homeland Security Department.

7 Buyer: EDO Corp.

Sellers: CAS Inc. and Impact Science and Technology Inc.

Gross purchase prices: $179.5 million for CAS and $124.2 million for Impact Science and Technology

Investment banks: BB&T Capital Markets/The Windsor Group for CAS; not available for Impact Science and Technology

Close dates: Sept. 6 for CAS and Sept. 15 for Impact Science and Technology

Why it's a big deal: By acquiring Impact Science and Technology, EDO doubled its intelligence business, picking up 200 employees and technical capabilities in areas such as advanced radar countermeasures, electronic attack and electronic intelligence systems, and systems engineering and analysis services. With CAS, EDO also strengthened its presence in Huntsville, Ala.

8 Buyer: General Dynamics Corp.

Seller: FC Business Systems Inc.

Gross purchase price: Not available

Close date: Jan. 18

Investment bank: BB&T Capital Markets/Windsor Group

Why it's a big deal: The acquisition of FC Business Systems removed an active acquirer in the government market. FC had made several acquisitions in recent years, including Computer and Hi-Tech Management Inc. For General Dynamics, the deal brought 1,000 more employees, half of whom had security clearances.

9 Buyer: CACI International Inc.

Sellers: Information Support Systems Inc. and AlphaInsight Corp.

Gross purchase price: $145 million for Information Support Systems and $42 million for AlphaInsight

Close date: March 1 for Information Support Systems and May 1 for AlphaInsight

Investment banks: Aronson Capital Partners for AlphaInsight and not available for Information Support Systems

Why it's a big deal: CACI continues to show it has a steady appetite for deal-making. In the case of Information Support Systems, CACI stuck with the acquisition after ISS lost a significant contract and renegotiated the price. The ISS deal also brought CACI more than 600 employees with security clearances, a hot commodity in today's market.

10 Buyer: Computer Sciences Corp.

Seller: Datatrac Information Services Inc.

Gross purchase price: Not available

Close date: Dec. 21

Investment bank: Houlihan Lokey Howard and Zukin

Why it's a big deal: Computer Sciences Corp. doesn't make a lot of acquisitions but usually does them well. Its acquisition and subsequent division of DynCorp two years ago proved to be a successful strategy. DynCorp increased CSC's ability to provide broad outsourcing services to the government. CSC sold the portion of the business that operated mainly overseas. By buying Datatrac, CSC has made a play to gain critical skills in the homeland security market, namely identity management and credentialing capabilities.

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