ManTech's Mantra: Do More Deals

By Nick WakemanManTech International Corp.'s acquisition blitz to secure new products and capabilities in work flow management, database conversion and systems development shows no signs of slowing anytime soon. The 30-year-old company, which traditionally has built information technology systems for the U.S. military and intelligence agencies, is eyeing two to three U.S. companies and three to four deals in Europe, company officials said.In the past two years, the privately held systems integrator has acquired five companies in the United States and abroad as executives plot to become a billion dollar player in the federal, state and local and commercial marketplaces by 2003. The Fairfax, Va., company should hit $500 million in revenue this year, up from about $400 million in 1997, said Hal Ammann, president of ManTech Advanced Systems International Inc. His unit provides systems integration services to the Department of Defense, intelligence agencies and the commercial sector, and generates roughly one-third of the company's overall revenue.About 70 percent of ManTech's business comes from the U.S. military and intelligence agencies, and 25 percent comes from commercial customers. The company butts up against Computer Sciences Corp. of El Segundo, Calif., Lockheed Martin Corp. of Bethesda, Md., and TRW Inc. of Cleveland, across its line of businesses.State and local governments account for 5 percent of overall revenues, but that figure should grow to 25 percent in five years, Ammann said. A centerpiece of the company's state and local push will be imaging technologies and database applications. (See related story below.) Ammann, who has a big hand in the deal-making process, said the acquisitions are designed to bring "a new capability or a strategic alliance or a product that we can bring to our existing customer base."ManTech is looking for that elusive formula of "one plus one equals three," as executives stake out a broader business base across both the government and commercial sectors, said Ammann. "We really don't do acquisitions for the pure sake of revenue." The company targets firms just coming out of the start-up phase, he said, noting that all but one of the five recent purchases involved companies with $10 million to $20 million in annual revenues. Ammann declined to reveal the purchase price of any of the companies.Praxa of Melbourne, Australia, which had about $60 million in revenue, was purchased by ManTech in March 1997. The company, which provides consulting and custom application software development to national and local governments, gave ManTech a strong bond with software giant Microsoft Corp. of Redmond, Wash. Praxa was Microsoft's Solution Provider of the year in 1996. "Obviously, that is a very tight Microsoft alliance," Ammann said. With Praxa in its fold, ManTech plans to push Windows NT migration services in the federal market, according to Ammann. "All the parts of ManTech are becoming much more Microsoft-oriented in the development of applications and in the tool sets," he said.Other companies ManTech picked up that could strengthen its federal base are Advanced Recognition Ltd. of Windsor, U.K., and Seel Ltd. of Scotland, purchased in January and September, respectively. They brought to the table imaging and document management products that ManTech plans to "Americanize" and release in the first quarter of 1999, Ammann said. Seel's form processing product will target government and commercial customers, while a check-processing product from Advanced Recognition will be keyed toward small and midsize banks, Ammann said. Both companies also will serve as a starting point for expanding into the European market, he said. Looking to Europe for acquisitions is an unusual but smart strategy for a U.S. systems integrator, said Richard Knop, a partner with the investment banking firm Boles, Knop and Co. of Middleburg, Va. Knop has discussed potential acquisitions with ManTech officials but has not yet completed any deals for the company.The two European deals have established ManTech as an end-to-end provider of data capture and document management solutions, according to Knop. "They are really trying to establish a foothold in that market, and it appears they are being successful," he said.The purchase of Tidewater Consultants Inc. in January 1997 led to an alliance with another IT heavy hitter ? IBM Corp. of Armonk, N.Y. Tidewater of Virginia Beach, Va., developed a relationship with the IT giant when it developed a database conversion tool several years ago.In June 1997, ManTech bought Applied Measurement Systems Inc. to supplement digital signal processing work the company does with the Navy.More recently, ManTech has added heft to its federal business through key subcontracts and the General Services Administration schedule. It is on the team of EER Systems of Seabrook, Md., one of the winners of the $9 billion GSA Seat Management contract for outsourcing desktop services. The addition of a GSA schedule for services last year contributed more than $20 million in sales to the company's bottom line. "We are pushing that hard," Ammann said.ManTech's private status may help rather than hinder its bid to reach $1 billion a year in revenue, said Jon Kutler, president of Quarterdeck Investment Partners of Los Angeles. Being private and large means ManTech is insulated from the short-term pressures of analyst expectations and quarterly reports, Kutler said. "They can wait for the slow pitches across the plate," he said.Ammann said ManTech founder George Pedersen, who serves as president and owns the majority interest in the company, is unlikely to take the company public during the next several years.