Making the climb back to the top

Acquisitions will play big role in making ATS a major middle-tier player.

Advanced Technology Systems Corp.

Founded: 1978; acquired in April 2006 by Federal Services Acquisition Corp.

Headquarters: Herndon, Va. Annual Revenue: $100 million.

Leadership: Edward Bersoff, chairman, president and chief executive officer.

Lines of business: Systems integration, infrastructure management, business process improvement, wireless services and specialized functional expertise.

Major customers: Labor, Education, Justice, Treasury and Homeland Security departments, Pension Benefit Guaranty Corp., Federal Housing Finance Board, Office of the Secretary of Defense, Defense Information Systems Agency, Defense Logistics Agency, Joint Chiefs of Staff, Defense Finance and Accounting Service, and several intelligence agencies.

Subsidiaries: Appix Inc., Number Six Software, Potomac Management Group Inc. and Reliable Integration Services.

Ticker: OTCBB: ATCT.OB

http://www.atsva.com

Edward Bersoff established his reputation as a visionary leader
in the government market when he founded BTG Inc. in 1982.


After he sold the company in 2001 to Titan Corp., Bersoff
followed a path familiar to many former chief executive officers
? he advised start-ups, served on corporate boards and
professional organizations, and helped information technology
companies expand.


Then, in 2005, Bersoff and a group of investors formed Federal
Services Acquisition Corp., a publicly traded company created to
buy businesses in the civilian and defense sectors. The targets
were midsize companies. "We didn't want to go through
the nurturing process of a small company and growing it
incrementally over time," he said.


In April 2006, the investors bought Advanced Technology Systems
Corp., of McLean, Va., for $124 million. Since then, they've
closed three acquisitions and reported revenues of $100
million.


According to the group's original plan, ATS executives
would remain, and Bersoff and his colleagues would form the board
of directors. But not everything went according to plan. Bersoff
discovered that what the owners really wanted to do was retire.


So when the sale was completed, the logical thing for Bertoff to
do was to step in and lead the company. "Now we're kind
of on a roll," he said, "so here I am the back in the
driver's seat again."


BIG PICTURE VIEW

Bersoff's years as an IT adviser and corporate board member
have kept him abreast of the major policy changes in the government
sector, but many of the issues are the same as when he ran BTG.
"There always have been funding issues, there are always
continuing resolutions and procurement practices that
change," he said.

One positive development he sees is a greater willingness on the
part of government to partner with the private sector than a decade
ago.


As chairman, president and chief executive officer of ATS,
Bersoff has led the company through several acquisitions while
keeping it focused on existing government contracts. Many of those
contracts are long-term relationships that ATS has had with the
Defense, Homeland Security, and Housing and Urban Development
departments.


ATS has also won new government contracts worth more than $52
million from the Labor, Veterans Affairs and Education departments,
the last as a subcontractor on Education's new $400 million
bundled contract won by Perot Systems Government Services.


MORE ACQUISITIONS AHEAD

In February 2007, ATS purchased Reliable Integration Services Inc.,
a woman-owned defense contractor. Valerie Perlowitz, president and
CEO at Reliable, has known Bersoff for years, and she signed on as
senior vice president at ATS. ATS also acquired Potomac Management
Group, a provider of maritime security consulting and IT, in
September, and Number Six Software Inc., an applications
development and IT provider, the following month.

Bersoff has worked to overcome the tensions that normally arise
when combining company cultures to create a unified, cohesive
organization, Perlowitz said. "We've spent a lot of
time increasing communication to make sure people are aware of
what's going on."


"The diversification that we have in various levels of
government ? state, local and federal ? as well as in
the commercial sector really positions ATS well to be very
successful in our plans for next year and beyond," she
said.


ATS' business strategy in 2008 and for the foreseeable
future will be to continue to enlarge the company, Bersoff said.
"We are going to make additional acquisitions in '08. I
don't know what they are yet because they're not on the
table. But we were pretty aggressive in '07, and we plan to
be equally aggressive in '08."


"We're looking at good, robust companies that have
strong market niches," Perlowitz added.


Bersoff wants ATS to increase its footprint in the intelligence
and defense communities, which now account for about 25 percent of
the company's revenue, he said. He recently hired Jim
Russell, a former colleague at BTG, to lead ATS' business
development effort. "He has a strong background in
intelligence, as do I. Our plan is to build in that
marketplace," Bersoff said.


The company also will try to expand in the "the
infrastructure side, the knowledge side, of defense as opposed to
the hardware side of defense, which is where the money is being
spent at the moment," he said.


SAFE GROWTH TARGETS

Overall, his plan is to establish ATS as a solid midsize government
contractor with no designs on challenging the large integrators or
positioning ATS for a potential purchase. Bersoff's goals are
to reach $250 million in revenue in three years and $500 million in
five years.

Moreover, he rejects the contention of some industry experts
that the best contracting opportunities in today's government
market go to large contractors.


"Being a mid-market integrator is like playing tennis in
the dead-man's zone. You can go there, but you can't
stay there long or you lose," said Robert Guerra, partner at
Guerra Kiviat Inc., which specializes in government contracting.
"In this buy-or-be-bought era, I think the better strategy is
to build value as a mid-market player and [then] sell to a large
integrator as an exit strategy."


Bersoff disagrees. "Like everything else, there's
pros and cons," he said. "All things considered,
I'd rather be a $150 million company in this marketplace than
a $30 million company in this marketplace. I've got far more
reach, I've got far more capability and resources. Yes,
I'm not Lockheed, I'm not Northrop Grumman, and
that's OK."


He said ATS will succeed because its clients will recognize it
as a well-managed company that is responsive and innovative and
delivers on its promises. "There is so much business that I
think those that complain about their lot in life are really
complaining about their inability to build their business,"
Bersoff said.


At least one industry expert is convinced that Bersoff's
triple-A reputation is well-deserved and that his plans for ATS are
not unreasonable. "There's still a lot to be gained
from being in the so-called mid-market," said Paul Serotkin,
president of Minuteman Ventures LLC, which advises clients on
mergers and acquisitions. "His track record is
excellent," Serotkin said. "He's a master
acquirer."


And for Bersoff, it also is fun being a CEO again. "There
is certainly a very rich experience being back in an active
management role," he said. "And it's certainly
invigorating. It keeps you busy, and it keeps you young, and
it's exciting."


David Hubler (dhubler@1105govinfo.com) is an associate editor
at Washington Technology.



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