M&A SPECIAL REPORT
Inside SRA's acquisition strategy
Deal for MorganFranklin unit fits a broader plan for new markets, capabilities, customers
- By Mark Hoover
- Apr 17, 2013
At the end of 2012, when most of the year’s mergers and acquisitions looked to be over, SRA International acquired MorganFranklin’s national security solutions business in a move to bolster its capabilities and its contract vehicle opportunities.
Of course, there’s a lot more to the story than that. SRA was drawn to the MorganFranklin business because integrated communications in the defense arena is a key market for the company, said George Batsakis, senior vice president of SRA’s defense group.
When a market looks good, you want to make sure you’ve got all your bases covered. Before the acquisition, though, SRA actually had a gap in their capabilities around integrated C4, and integrated communications in particular, Batsakis said.
For MorganFranklin, the sale allowed the company to find a home for a good business, but a business that no longer fit with their long-term strategy to focus on financial management, performance improvement and technology capabilities.
For this reason, the acquisition was picked as one of the best divestitures of 2012 by Washington Technology's panel of M&A experts.
Along with the benefits of expanding its defense, national security and health portfolios, SRA also picked up 180 new employees through the acquisition, and the employees were another important indication that the deal was good for both companies.
SRA found that the people that they acquired from MorganFranklin “were high energy, extremely ethical, hard-working, and in addition to their great contract vehicles and technical expertise, they also made for a good cultural fit,” said Rick Nadeau, SRA executive vice president and chief financial officer.
“The capabilities that we obtained were good because they were complimentary," Nadeau said, "but it was also an incredible cultural fit that made everybody feel very comfortable,” he said.
MorganFranklin's business unit also brought two large government IT and communication support contracts: the Global Tactical Advanced Communications Systems and Services contract from the Army and the U.S. Government Omnibus Network Enterprise contract from the Defense Information Systems Agency.
Aside from the fact that the acquisition filled a capability gap, it also fits into the company’s larger strategy; SRA has been on a “strategic effort to build up our capabilities across the IT and the C4 lifecycle, and that has entailed building up our pipeline, increasing our capacity and quality of our bids, and injecting into our business a handful for strategic hires to help us open up in new markets,” Batsakis said.
Part of this building process is scanning the market and finding opportunities. When SRA looked around, they saw that the C4 comms market is similar to the IT market—it’s just that they had different technologies and different domains, he said.
They saw those two markets as converging with enterprise applications that go end-to-end across the tactical, strategic and enterprise communications systems that do the same thing, and that is where the company’s gap in integrated C4 was, Batsakis said.
That’s what made the MorganFranklin’s national security business such a good acquisition target. SRA looks at a lot of potential targets all the time, Nadeau said, but he emphasized that the company is very selective.
What they look for is whether the target can bring new capabilities to SRA that are complimentary to what the company already does, or whether the target brings SRA access to new customers and markets—or both, he said.
Just as important as the capabilities, though, SRA checks the culture of potential acquisition targets to see whether the meshing of employees would be smooth.
“So, we look at the capabilities—are they compatible and complimentary to what we do, and do they bring us new markets and customers—but we also ask whether the people are going to be happy here, and do we think that they’re a good fit for us,” Nadeau said.