Arlington Capital building firm worth watching

Over the last eight months, Arlington Capital Partners has created a middle tier player that is targeting a new, but long term niche in the market – the emerging warfighter domains of cyber, electronics and space.

In June, Arlington Capital acquired EOIR Technologies a company with deep capabilities in the electromagnetic spectrum.

Two more deals were already in the works at that time, and in November, the private equity group closed the acquisitions of Intelligent Software Solutions and Proteus Technologies. It merged those two companies into EOIR to create Polaris Alpha.

Then just three weeks ago, another piece was added when Polaris Alpha acquired Intelesys.

The deal pushed Polaris Alpha solidly into the middle tier with about $260 million in annual revenue and 1,200 employees.

The idea is to build a company around three emerging warfighter domains: cyberspace, space and the electro-magnetic spectrum, said Polaris Alpha CEO Pete Cannito.

The first three parts of Polaris – EOIR, Intelligent Software Solutions and Proteus Technologies – established a base across those three domains, he said.

EOIR brought capabilities around electronic warfare, the visible and near visible spectrum, radar and other technologies in the electro-magnetic space.

Proteus’ strengths are in cybersecurity, and ISS has been a player in the space domain, Cannito said.

The addition of Intelesys added more capabilities in the cybersecurity and intelligence areas.

While these domains aren’t necessarily new, their importance and profile has been on the rise.

Cannito described them as non-traditional domains when compared to land, sea and air. But there is a growing need for command and control systems, which is one of the capabilities the company brings to the market, he said.

The company also has data analytics capabilities for structured and unstructured data as well as video. They also are actively involved in development programs in deep learning and higher end analytics and algorithm development around autonomy.

“We have the ability to take those capabilities from the R&D space and get them out into operations,” Cannito said.

To deliver those capabilities, Polaris Alpha is the prime on several large contracts including the $585 million Airspace Precision Engagement Research Engineering contract, a single award contract with Air Force Research Lab.

It is also on multiple award contracts such as the $995 million Technical Information Engineering Services contract with the Army and the $800 million Electromagnetic Maneuver Warfare Command and Control contract with the Office of Naval Research.

They also hold a $349 million contract with the Army Research Lab known as the Persistent Surveillance Intelligence Reconnaissance and Surveillance contract and a $185 million cyber contract with the intelligence community.

Some of the major customers include the Air Force Research Lab, the Army Communications and Electronics Research, Development and Engineering Center, Central Command, Joint Space Operations Center, the Naval Surface Warfare Center Dahlgren and several intelligence agencies.

The company does no more than 10 percent to 15 percent of its business with any single customer, Cannito said. Eighty percent of its work is as a prime contractor.

“Diversification is important for the stability of any company but this also speaks to the number of customers that recognize the unique set of capabilities that we have,” he said. “From a growth perspective it gives us lots of opportunities.”

One software product has more than 10,000 users in the national security community, said David Wodlinger, a partner at Arlington Capital.

“It verifies for us that the solutions we have connect with a lot of different customers,” he said.

The company is in the process of integrating the four companies into one, but from a cultural perspective they are already there. “All the companies really value smart people who want to collaborate and work together to solve tough national security problems,” he said.

More acquisitions are likely in the works.

“We’ll continue to be aggressive in those domains,” Cannito said.

Those three domains – cyber, space and electromagnetic – are just at the beginning of their life cycles, Wodlinger said.

“These are enduring problems where the government needs high-tech companies to come in with solutions,” he said. “We think this will be fertile ground over the next several decades.”

Cyber, of course, has been contested for a while, but space is just emerging as a contested domain and the electro-magnetic spectrum is critical to network-centric warfare, Cannito said.

“We think there is a spot in the market for a high-tech company focused on these emerging technologies and domains,” he said. “We are building something very new here.”

This isn’t Arlington Capital’s first foray in the federal space. It also is backing Endeavor Robotics, which was the defense business of iRobots. It also has MicroPact and Quantum Spatial in its portfolio. The firm also had successful exits with the sale of Novetta Solutions and Compusearch Software Systems.

Wodlinger said that there is no rush for Polaris Alpha. “We typically hold our investments for four to seven years,” he said.

So, four deals in less than eight months and an emerging market in need of lots of high-tech solutions. Looks like this is definitely one to watch.