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By Nick Wakeman

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Nick Wakeman

TASC sale triggers more questions

Now that Northrop Grumman has found a buyer for TASC a couple questions still need to be answered.

Foremost is who is next? Who else, particularly among the large defense companies, will be selling a division or groups of contracts for technical and engineering consulting services?

In some ways, Northrop Grumman may have had it easier than most. TASC has survived two major acquisitions and has remained intact as a standalone unit. It was its own business and then was acquired by Litton Industries, which kept it as a separate division, and then Litton Industires, which also included PRC, was acquired by Northrop Grumman.

I challenge anyone to find anything official with the name PRC on it, but TASC remains.

So selling it was likely easier and cleaner than having to cleave units and contracts to get out the parts sensitive to organizational conflicts of interest (OCI).

In some ways, the government did General Dynamics a favor in 2006 when it forced the company to sell off the portion of Anteon International that provide similar services when General Dynamics bought Anteon. To complete the acquisition, General Dynamics sold about $200 million worth of Anteon to Alion Science and Technology.

We’ll keep talking to companies to see if they have business units or contracts that they expect to sell to comply with OCI rules. I’m not holding my breath about getting any answers because I know companies are loathe to talk about potential divestitures. But we have to ask.

The other question I have is what kind of company will TASC be?

Private equity such as General Atlantic and Kohlberg Kravis and Roberts work with certain timeframes. It won’t be too many years before they’ll want some sort of exit to recoup their investment.

The most likely scenario is public stock offering. TASC is of a size that few other companies can buy it, so TASC likely will remain independent.

My guess is that TASC will be an aggressive buyer, looking at other providers of systems engineering and technical advisory consulting services as acquisition targets.

Some of these services are what the government wants to bring back inhouse, but the reality is that the government will always need contractor support for highly technical acquisitions.

With those kind of market conditions, TASC and its investors might find themselves in a ripe position.

Posted by Nick Wakeman on Nov 09, 2009 at 7:23 PM


Reader Comments

Tue, Nov 10, 2009 RGoad Dayton, OH

Alliant is an IT services contract. TASC was acquired by KKR and GA who want TASC to cover the "intersection of professional services and IT". Since NG is selling TASC to avoid the McCain-Levin generated OCI problem for OEMs that provide services, the Alliant contract would be almost worthless to NG.

Tue, Nov 10, 2009 Michael Lent Washington, DC

Which companies will find the "nonconflicted" TASC more of a competitive threat? Any that posture themselves as free of pertinent, unmitigated OCI and in a position to be objective advisers upstream of big buys of defense systems. Booz Allen Hamilton comes to mind, particularly in services like cost and economic analysis. Scanning the KKR portfolio, even a paranoid govt customer won't find other contractor or overseas stakes owned by the parent that could spawn OCI worries about TASC at this time. The other TASC owner, General Atlantic, has more technology and country stakes, e.g. Lenovo/China, that could provide a wisp of worry for a few potential customers. Carlyle, Booz Allen's 70 percent owner, on the other hand, has had numerous positions or full ownership of significant govt suppliers, as well as overseas investors from the Middle East and potential-threat countries in its funds that reportedly gave pause when Carlyle's purchase of BA was being cleared. Obviously, the government didn't block that sale, but OCI concerns remain a pop-up potential for any firms like TASC and BA owned by aggressive PEs. Congress may not believe the PE ownership structure is as insulating from OCI as the principals and agency customers do at this time. Got a kick out of the PR spin of the new TASC owners, who speak of TASC as a national resource in the same sense that the FFRDCs often posture themselves. But that's for customer consumption rather than the PE investors grasping for high returns.

Tue, Nov 10, 2009

FFRDCs continue to use their special provisions to do work that both large businesses (like a TASC or Booz Allen) and smaller businesses can do as well if not better. Lack of competitiveness means lack of innovation for FFRDCs.

Tue, Nov 10, 2009

I would guess Scitor and TASC would combine to fill a consulting niche

Tue, Nov 10, 2009

Since TASC was responsible for winning the Alliant Large Business Contract for Northrop, will TASC keep their Alliant or will it go to Northrup?

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