Mercury acquires Germane in another rugged tech deal

Mercury Systems makes a second buy of a rugged server maker in recent months, this time for Germane Systems.

Mercury Systems said Tuesday it has acquired Chantilly, Virginia-based rugged server maker Germane Systems for $45 million to further grow the portfolio of computers and storage systems for U.S. and international defense programs.

The deal comes nearly six months after Mercury closed its $180 million purchase of another rugged server company in Themis Computing. Mercury said it will combine Themis with Germane to create a business line of at least $100 million in annual revenue in rugged servers for command, control and information applications, Mercury said.

During Mercury's fourth quarter and fiscal year-end earnings call Tuesday, CEO Mark Aslett said the company made both deals to enter different parts of the rugged server market.

"If you look at Themis, 80 percent of that business is in the naval surface fleet," Aslett told analysts. "If you look at Germane, 80 percent of their business is targeting the subsurface. They're pretty much in every U.S.-based submarine that is out there (and) they've got a growing business in airborne... so there's very little overlap from a programmatic perspective."

Investment bank KippsDeSanto advised Germane on the transaction with Mercury.

Andover, Massachusetts-based Mercury has been among the most active buyers over the past three years in a busy period for federal market merger-and-acquisition activity.

Including Germane and Themis, Mercury has put $620 million toward acquisitions of seven companies in the past 31 months to become a more formidable player in mission computing and C4I technologies -- command, control, communications, computers and intelligence.

Mercury saw Themis in particular as a platform from which to make more acquisitions, Aslett said on the call.

That run of acquisitions has positioned Mercury to push past the $600 million-revenue mark for its current fiscal year 2019 started in July, the company said its year-end financial statement.

Including Germane, Mercury expects sales of $602 million-$624 million for FY 2019. The company reported FY 2018 sales of $493.2 million compared to $408.6 million for FY 2017.

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