TASC deal brings a bolder competitor to the market

TASC leadership likens separation from Northrop to being set free

When TASC Inc. was sold by Northrop Grumman Corp. last year to meet new organizational conflict of interests federal regulations, the company returned to its original status as an independent company. The result is a company freed to specialize in systems engineering, technical assistance and other services to the Defense Department and intelligence community.

As a unit of Northrop Grumman, TASC could not provide those services for any program that the parent company might have been interested in bidding on or pursuing.

“We really needed to separate TASC from Northrop Grumman both from the perspective of Northrop Grumman shareholders but also from the perspective of TASC’s continuing success,” said Wood Parker, president and chief executive officer of TASC for the past five years. He was personally involved in the divestiture procedure.

At the time, TASC was part of Northrop Grumman’s Information Systems sector and was expecting $1.6 billion in revenue in 2009.

Parker cited what he called the government’s “increasingly restrictive OCI policies plus the passage of the Weapons Systems Acquisition Reform Act in 2009” as the main drivers behind the decision to sell TASC.

Goldman Sachs was brought in as adviser on the sale and presented TASC to a number of interested firms. “Once we started meeting with interested firms or interested potential buyers and the actual close on Dec. 18, 2009, I would say [the process took] six months,” he said.

In November, Northrop Grumman agreed to sell the Chantilly, Va., unit for $1.7 billion to equity groups General Atlantic and Kohlberg Kravis Roberts and Co. The deal was picked as the best overall merger and acquisition transaction of 2009.

The sale was significant because it created a new force within the federal IT market for winning contracts and possibly making acquisitions, analysts said. They also envisioned TASC becoming a long-term prominent independent player in the market.

“Obviously, we have not made any acquisitions, but as we go forward, the strategic plan is to continue to do what TASC has done throughout its legacy,” Parker said.

“The fact that we are separated from Northrop Grumman in terms of OCI constraints means that we can pursue opportunities that we were precluded from pursuing as part of Northrop Grumman. So just by definition, the opportunities that we have are significant,” he added.

Parker said the company is working closely with KKR and General Atlantic to pursue a couple of unnamed opportunities “that in the past we probably would have been precluded from pursuing.”

“Acquisitions are always a part of our strategic plan in terms of potential growth going forward,” he said, adding that there have been no significant management changes or approaches to business since the divestiture.

“Obviously, we have new partners; we’re a stand-alone company,” Parker said. “There are transition issues. But in terms of the basic business, I am comfortable in saying there are a number of things that remain constant in terms of TASC, our strategy and our long-term success.”

The newly independent TASC also has kept a number of ongoing government contract vehicles it had under Northrop Grumman. “We wanted to make sure that we were nonconflicted in terms of OCI, so any contract that was non-OCI sensitive remained with Northrop Grumman,” he said.

"But all of the systems engineering, systems integration, services advisory types of contracts did come with TASC,” Parker added.

When it was a corporate unit, TASC focused mainly on the intelligence community, including DOD intelligence contracting. Now free of its former OCI restrictions, TASC has set its sights on two specific growth areas, Parker said.

The 44-year-old company will pursue new customers at DOD and expand into federal civilian agencies.

“Our market area has expanded tremendously,” Parker said.

In addition, the divestiture allows TASC to go after subcontracting work within some of the larger Northrop Grumman programs it could not previously pursue, he added.

At present, TASC employs about 5,000 engineers and analysts, and Parker anticipates hiring an additional 1,000 employees this year. Some will be assigned to functional areas as TASC continues to formalize its new structure as an independent, stand-alone company; others will work on new contracts that Parker said he anticipates winning.

“We made it through [2009] very well, and I feel very good about our position as we start 2010,” he said.

TASC’s medium- and long-range strategic plans anticipate significant growth during the next several years, but Parker declined to provide precise financial targets.

“Let’s put it this way, TASC has grown in excess of a double-digit basis for the past five years and even before that,” he said. “And we anticipate growing at that level going forward.”

Asked about possible plans for going public and an initial public offering of stock, Parker said, “You’d probably have to talk to our new partners, but any sort of IPO or other event like that is several years down the pike, if then.”

Reader Comments

Please post your comments here. Comments are moderated, so they may not appear immediately after submitting. We will not post comments that we consider abusive or off-topic.

Please type the letters/numbers you see above

What is your e-mail address?

My e-mail address is:

Do you have a password?

Forgot your password? Click here
close
SEARCH
contracts DB

Trending

  • Dive into our Contract Award database

    In an exclusive for WT Insider members, we are collecting all of the contract awards we cover into a database that you can sort by contractor, agency, value and other parameters. You can also download it into a spreadsheet. Read More

  • Is SBA MIA on contractor fraud? Nick Wakeman

    Editor Nick Wakeman explores the puzzle of why SBA has been so silent on the latest contractor fraud scandal when it has been so quick to act in other cases. Read More

Webcasts

  • How Do You Support the Project Lifecycle?

    How do best-in-class project-based companies create and actively mature successful organizations? They find the right mix of people, processes and tools that enable them to effectively manage the project lifecycle. REGISTER for this webinar to hear how properly managing the cycle of capture, bid, accounting, execution, IPM and analysis will allow you to better manage your programs to stay on scope, schedule and budget. Learn More!

  • Sequestration, LPTA and the Top 100

    Join Washington Technology’s Editor-in-Chief Nick Wakeman as he analyzes the annual Top 100 list and reveals critical insights into how market trends have impacted its composition. You'll learn what movements of individual companies means and how the market overall is being impacted by the current budget environment, how the Top 100 rankings reflect the major trends in the market today and how the biggest companies in the market are adapting to today’s competitive environment. Learn More!