What's next for Blue Delta Capital after latest exit?

Blue Delta Capital Partners, a government market-focused investment firm, marked one of its most high-profile exits in November when PAE acquired intelligence analysis firm Metis Solutions for $92 million.

McLean, Virginia-based Blue Delta first partnered with Metis in 2016 to help that company steer through its next phase of growth, both organic and through acquisitions like that of Pluribus in 2019.

Worth pointing out is the eventual buyer of Metis is also very familiar to Blue Delta, which partnered with private equity firm Lindsay Goldberg to support the latter’s acquisition of PAE in 2011.

“There’s a lot of synergy for what they’re doing, and if you throw it in with Centra (which PAE acquired alongside Metis), that’s a compelling vision and opportunity for the Metis team to continue and grow in their professional journey,” said Mark Frantz, co-founder and general partner at Blue Delta.

Blue Delta is somewhat unique in that it concentrates on government contractors and certain cybersecurity firms located in the Washington, D.C. region and takes non-controlling equity stakes in those companies. The idea is to partner with entrepreneurs in shaping the growth strategies of their businesses.

“This is our neighborhood and our community, so if we can be helpful in any way shape or form or leave them better than we found them, we always want to be talking to them,” Frantz told me. “If they still want to stay in control of it, enhance their teams, get some advice and perspective.”

Other high-profile government market exits in recent years included the sale of The Tauri Group to LMI in 2019; helping 42Six get acquired by the former Computer Sciences Corp. in 2012 (later CSRA and now General Dynamics); and partnering with Acentia through its eventual purchase by Maximus in 2015.

Some of the current backings include open source software company Amida, wireless technology outfit Shared Spectrum Company and encryption firm Virtru.

The investment firm closed its third and most recent fund in 2019 at $150 million, past the $125 million target, to continue the thesis of investing between $10 million and $30 million of equity in companies looking for support in their next phase of growth.

Blue Delta has taken that capital and invested in three companies so far this year, according to its website.

“We continue to do what we’ve always done, partner with good CEOs who are doing differentiated cutting-edge stuff for their customers,” Frantz said.

Given his role as a venture investor, a natural question to ask Frantz for his outlook both on the government market and in tandem with that the overall D.C. economy.

“You’ll see the government continue to infuse capital and that should be reasonably good for our sector, they’ll be shifting dollars, maybe a cap on defense and more spend on health,” Frantz said.

“I think you’ll see the same for the economy at-large and government services at-large, at least pretty deep into 2021 and maybe beyond.”