PAE acquired by new private equity group

PAE's private equity owner has made a deal to sell the company to another private equity firm.

PAE in recent years has made a name for itself as an acquirer of companies, but the company now finds itself among the acquired with a deal by its owner to sell the company to another private equity buyer.

Financial terms of the deal have not been disclosed, but PAE’s owner since 2011, the private equity group Lindsay Goldberg, is selling the company to another private equity organization Platinum Equity.

The deal is expected to close by the end of February and John Heller, PAE’s CEO, and the rest of the senior management team are expected to stay on board.

“PAE has a strong management team, long-term customer relationships and dedicated employees delivering vital services around the world,” said Louis Samson, a partner at Platinum Equity.

The deal is a positive sign for the market, according to investment bankers. Larry Davis of Aronson Capital.

“It speaks to the relatively positive outlook for federal spending,” said Larry Davis of Aronson Capital. Growth is expected to be muted, but the expectation is that there will be stability and slow growth, he added.

Bob Kipps of the investment bank KippsDeSanto called the PAE investment a winner for Lindsay Goldberg. The company had solid organic growth, used the capital markets well and made several accretive acquisitions, he said.

There have been rumors in recent months that Lindsay Goldberg was looking for an exit after owning the company for five years – a typical length of time for private equity groups.

Going public though a stock offering was probably a long shot for a company like PAE because of some of the high risk environments it works in around the globe.

Its work in Africa and other hotspots, while lucrative, also likely limited the interest of public companies, Davis and Kipps said.

"PAE’s capability profile made it a bit of an apple vs an orange when compared to the other, more technology-oriented, public firms," Kipps said.

There also is the issue of PAE’s size, which after the acquisitions it has made in the last five years, is pushing the $2 billion mark. There are a limited number of companies in the space that can make such a large award.

Another positive sign from Davis’ perspective is Platinum involvement. The private equity group doesn’t have a government focused investment in its portfolio. “Their investment in PAE speaks to the positive outlook for federal spending,” Davis said.

In the announcement of the deal with Platinum, Lindsay Goldberg Partner Russell Triedman said the group was “very pleased with our investment and partnership with PAE’s CEO John Heller and his management team.”

Lindsay Goldberg acquired PAE from Lockheed Martin in 2011. At the time, it primarily did logistics and nation building work for the State Department. Through acquisitions, it has added capabilities in range support, aviation, base operations, counter-terrorism and national security.

In the transaction with Platinum, the investment bank Houlihan Lokey served as an adviser to PAE.

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