Veridian Strengthens Info Security Hand

By Richard McCaffery and Nick Wakeman, Staff WritersVeridian Corp. has signed a letter of intent to buy Trident Data Systems, a move that positions the fast-growing information technology company to chase a wide array of information and infrastructure protection work throughout the government, company officials said.The deal, announced April 19 and expected to close this summer, is Alexandria, Va.-based Veridian's fourth acquisition in 14 months. Terms of the deal were not disclosed. Los Angeles-based Trident brings Veridian a suite of front-end information technology security tools, such as intrusion detection, monitoring and response products, and turns it into a $400 million company with 3,900 employees. Veridian provides modeling and simulation, secure networks and communications and engineering and analysis to the Department of Defense, global government customers and state and local agencies. "It means we can offer full service, end-to-end infrastructure protection and security," said Phillip Lacombe, Veridian's senior vice president of policy and communications and former director of President Clinton's Commission on Critical Infrastructure Protection.The two privately held companies already have started assembling proposals to pursue information security opportunities at the Army, Navy and Air Force as well as Department of Transportation and NASA. "The thing about infrastructure protection is everybody needs it," Lacombe said.Trident, which has focused on information protection since its founding in 1975, has 900 employees and expects to report $92 million in 1998 revenue. It serves mainly customers in the Defense Department and intelligence agencies. About $12 million in revenue last year came from commercial clients.Veridian executives plan to hit $500 million in revenue by 2000 and $1 billion by 2003. The company's revenue in 1998 was an estimated $320 million, industry officials said.The deal "is very consistent with Veridian's pattern of acquisitions," said Jerry Grossman, director at Houlihan Lokey Howard & Zukin of McLean, Va. Veridian targets companies that bring high-end research and development technologies in the defense and intelligence areas, he said.Veridian's information assurance and critical infrastructure thrust "is a natural extension into an area we feel is going to be important in the coming decades," said David Langstaff, chief executive of Veridian.Founded in 1997 by the merger between Calspan SRL Corp. of Washington and Veda International of Alexandria, Veridian's primary customer is the government. It accounts for 80 percent of the company's overall business, Langstaff said. Commercial business accounts for 20 percent of overall revenue, while 10 percent comes from international customers, he said.Veridian competes with high-end systems integrators such as CACI International Inc., Nichols Research Corp., Science Applications International Corp. and TRW Inc. Its acquisition strategy has been straightforward: Find IT companies with compatible cultures that form a strategic fit in the areas of information technology, space, modeling and simulation.Analysts said Trident should give Veridian a boost in a growing market: security. "This is a hot market in the government, because [the government] isn't buying ships and tanks and planes, but it is buying information technology," said Thomas Meagher, a director at the investment banking company Boles, Knop & Co., Middleburg, Va.And most analysts think the two companies will jell quickly. "Trident has a strong corporate culture," said Jon Kutler, president of Quarterdeck Investment Partners of Los Angeles. "They've kept a low profile and focused on strong internal growth." Veridian, on the other hand, has been growing primarily through acquisitions, so the skills of the two companies should complement each other well, he said.Trident brings the ability to drive internal growth, while Veridian has the ability to make deals, added Kutler.Veridian initially focused on testing, evaluation and other high-end engineering services primarily for the Department of Defense and NASA. Last year, it morphed into more of a systems integration and IT services company with the acquisition of three companies: Rail Co. of Edgewood, Md., Datumtech of Buffalo, N.Y., and Pacific-Sierra Research Corp. of Santa Monica, Calif.After a year of integrating the three companies, Veridian reorganized in January and emerged with three business units and 3,000 computer scientists, engineers, test pilots and systems analysts at more than 35 locations throughout the United States. Analysts also give high marks to the company's management. "Like Anteon and Averstar, Veridian is a very well-run and well-backed private consolidator," said Douglas Schmidt, managing director of Legg Mason Inc. of Baltimore. "I like their management. They're young, aggressive and sensible."Former U.S. astronaut Joseph Allen serves as the chairman of Veridian, and Paul Kaminski, the Pentagon's former undersecretary of defense for technology and acquisition, is on the board of directors. Veridian officials approached Trident several months ago about a deal, although the company was not looking for a buyer, said Dave Muckley, Trident's chief financial officer. But "we are extremely pleased, because we think our cultures match and line up well," he said. Both companies "put a lot of emphasis on their people."