Global Defense Technology and Systems acquisition by a private equity firm reinforces company's business strategy.
On one level, customers of Global Defense Technology and Systems shouldn’t see a huge change from the proposed $315 million acquisition of the company by a large private equity firm. The same goes for GTEC employees.
The company’s business plan and strategy remain intact.
“We want to build the next great mid-sized, mission-oriented defense and intelligence firm,” said John Hillen, president and CEO.
2011 M&A special report
The company announced Thursday morning that it was being acquired by Ares Management, a private equity group. Ares is paying $24.25 a share, a 51 percent premium over the company’s closing stock price on March 2.
While GTEC has the option of considering counteroffers, the deal is expected to close by June 30.
“Ares has made it pretty clear that they want to retain and build on the management team and the employees,” Hillen said. “The only thing that is changing is the ownership and the capital structure.”
It’s the change in the capital structure that may have the biggest impact on the market and potentially GTEC’s competitors because it will allow the company to do more and larger acquisitions.
The company will be Ares’ only major investment in the defense and intelligence segment of the market, Hillen said.
“They are backing us and they are going to use us to build upon our business plan,” he said. “Our employees and customers should be really jazzed.”
Not that GTEC has been shy to this point. The company closed two acquisitions last year, buying Zytel Corp. and Signature Government Solutions as it builds out is mission-oriented capabilities in technology and intelligence services and force mobility and modernization systems. The company’s 2010 revenue was $232.7 million, compared to $212.8 million in 2009. For 2011, the company expects revenue in the $315 million to $325 million range.
“We are going to continue to do the great acquisitions when we see firms with the same culture and mission orientation,” he said.
While the company had resources on its own to continue to build and grow, being part of Ares elevates GTEC’s dealmaking ability.
“Ares Management is an enormous firm and being part of that investor group gives us access to a lot of capital to do more and bigger deals than we could as a public company,” Hillen said.
The private equity firm has $39 billion under management.
“We anticipate that this long-term investment will enable the existing management team to expand its cutting edge and established franchise—one that is intrinsically involved with the growing markets for IT and national security,” said Matt Cwiertnia, senior partner of Ares Management, in a statement.
Ares' interest in GTEC reinforces the direction the company has been going and the need for strong mid-sized companies, Hillen said.
"Our customers have such big complex challenges that you need the big primes, but you also have to have great, credible contractors that are mid-sized and good small businesses," Hillen said. "We see a hole in the market for mid-size companies. There is just a spare handful of them."
For Hillen, a mid-sized company is in the $250 million to $1.5 billion range. "We are well on our way," he said.
NEXT STORY: No-compete contracts decline at DHS