ICF's Macro acquisition moves it deeper into health care

ICF International Inc.'s acquisition of Macro International Inc. was about two things: a good fit and an ability to move ICF deeper into the coveted health care market.

ICF paid $155 million in April 2009 to acquire Macro, an advisory services firm that specializes in energy and cybersecurity in addition to health programs.

“We were trying to expand in the health arena, and we thought it would be a great fit for us,” said Sudhakar Kesavan, ICF's chairman and chief executive officer. The deal landed ICF on the short list of the best dealmakers of 2009. ICF also closed the acquisition of Agent Logic during 2009.

Macro has been "around for 40 years, so we knew about the fact that they were very strong in several research areas, especially in the broad health space,” he said, adding that Macro’s client list “was nearly 100 percent federal.”

Renamed ICF Macro, the company’s major clients include the Centers for Disease Control and Prevention, National Institutes of Health, and the Health and Human Services Department, in addition to the State, Education and Veterans Affairs departments.

Kesavan said Macro had been in his sights for some time, and the two companies had begun merger talks several years ago. But internal organization issues with Macro’s parent company, InfoGroup, stalled the talks, he said.

When a new management team took over, “it was easier to get their attention,” he added.

Founded in 1966, Macro was no stranger to new ownership.

In 1999, the company was acquired by Opinion Research Corp., which was acquired in 2006 by InfoUSA. Macro resumed business under its legal name, Macro International Inc., and began operating as a wholly owned subsidiary of InfoUSA, which became InfoGroup.

In 2007, Macro International merged with Social and Health Services Ltd.

ICF’s due diligence showed that Macro was a solid business, had a substantial amount of work in the pipeline, and was well respected in the industry, Kesavan said. In addition, the two companies were familiar with each other from work they had done at HHS.

“So it wasn’t as if this was someone completely unknown to us,” he said.

ICF grew by almost 700 employees when the acquisition was completed. “Culturally, there was not much of a difference,” Kesavan said.

The expanded company has merged the legacy offerings “and that has given us some significant scale at NIH, at CDC and at the State Department,” he said.

Former Macro employees have begun to work with some of ICF’s clients, and that has led to $40 million in new work, primarily at HHS, he added.

In February 2008, a $275 million, five-year credit line from a group of banks led by Citizens Bank of Pennsylvania provided the funding for the acquisition.

Kesavan foresees organic growth of between 11 percent and 16 percent this year, which could include further acquisitions because ICF has new purchasing power.

“We raised nearly $85 million in a secondary offering, so we have paid down our credit line substantially after the Macro acquisition,” he said. “We certainly have the financing to do additional acquisitions.”

Kesavan has stated publicly that ICF’s growth strategy was to acquire “profitable, high-quality firms that provide significant growth potential and cross-sell opportunities” in its key markets.

“I think we’re fortunate that the spending environment and the general markets are focused on the areas where we have some expertise,” he added.

McGrath North Mullin & Kratz, PC LLO and Arent Fox LLP acted as ICF’s legal counsel on the transaction. RSM McGladrey Inc. conducted financial and tax due diligence.