An inside look at Deltek's $1.1B acquisition

Anyone expecting wholesale changes to come out of the acquisition of Deltek by the private equity group Thoma Bravo will be sorely disappointed.

The group’s $1.1 billion acquisition of Deltek takes the company private and buys out Deltek’s largest shareholder, New Mountain Capital, which held 59.5 percent of the stock.

The company’s management, led by CEO Kevin Parker, stays intact and the company’s strategy remains the same, he told Washington Technology.

The only thing that may change is the pace of implementing that strategy, he said.

“Not being a public company will help accelerate a few things we’ve been working on,” Parker said. “When you measure company in 90-day increments, you tend to go at a more moderate pace.”

One area that the company would like to invest more rapidly in is new product development, he said.

A big part of Deltek’s growth over the past seven years, since New Mountain acquired the company and Parker came on board as CEO, has been mergers and acquisitions.

That activity has been on hold for most of 2012, as Deltek worked through the process of New Mountain’s exit, Parker said.

But M&A activity will pick up now, he said.

Areas of interest in the government contracting space include adding business development software and applications to Deltek’s portfolio, as well as increasing its capture management capabilities.

“On the information solutions side, we’d love to add to the databases and research arm, particularly in the state and local market and in federal with architecture, engineering and construction and research,” he said.

Deltek will also be interested in acquisitions in the broader professional services markets in Europe, South America and Asia, Parker said.

The $13 a share price that Thoma Bravo is paying for Deltek is 7 percent below the company’s share price on Friday, but 24 percent higher than before the news broke that the company was looking for a buyer.

At least three law firms, Harwood Feffer LLP, Powers Taylor LLP and Rosen Law Firm have announced that they are seeking clients to file suit against Deltek and its board for not getting a higher share price.

Parker was not familiar with the threatened lawsuits but said that the share price had been driven up by speculation of a sale starting in mid-June.

“Our board was very careful and thoughtful about the process and was looking at the unaffected price,” he said. “We feel that this is a very good premium.”

In the coming days, the company will be filing documents that will explain more about the process. “Whatever lawsuits there may be, they will be quickly dismissed once everyone understands the process,” Parker said.

For now, the company will continue to push its strategy with a plan for a return of investment to Thoma Bravo that was similar to New Mountain’s experience – growing revenue and increasing profitability.

“The first half of this year as been terrific for us with double digit growth in our govcon business and accelerating profitability. We continue that to continue through the second half of the year,” Parker said. “Our focus now is to double down and continue to be successful, rather contemplate changes.”