Flush With Cash, Maximus Eyes Acquisitions


Flush With Cash, Maximus Eyes Acquisitions

By Tania Anderson
Staff Writer

With a successful initial public offering just under its belt, McLean, Va.-based Maximus Inc. plans to make at least one acquisition before the end of the year to strengthen its position in the health and human services market.

The 22-year-old company, which provides program management and consulting services to federal, state and local government health and human services agencies, raised $66 million from its IPO June 12. Maximus sold 4.4 million shares of common stock, valued at $16 per share.

Maximus photo
David Mastran, Founder and Chief Executive of Maximus

David Mastran, founder and chief executive of Maximus, said that proceeds from the IPO will be used to make acquisitions and start an employee stock option plan. Maximus officials are looking at smaller government contractors in the same market, said Mastran, who declined to identify possible candidates.

"We're the pioneer of this industry, as well as the first one to go public," said Mastran. The company, which has two divisions, has grown 36 percent every year for the last 10 years and has increased revenues from $19 million in 1990 to $100 million in 1996.

Company officials expect the company's annual growth rate to increase to 40 percent because of its IPO and the increase of government contracts in the social services arena. The company's Government Operations Group administers and manages government health and human services programs, including welfare-to-work and job readiness programs, child support enforcement, managed care enrollment and disability services. The Consulting Group offers health and human services planning, information technology consulting, strategic program evaluation and revenue maximization services.

Last fall, one of the 10 largest companies in the U.S. made an offer to buy Maximus, which triggered a company review of how much the company could get from the stock market, he said. Mastran, who would not identify the company that wanted to buy Maximus, said the company was able to get more money by going public.

According to Maximus officials, federal, state and local governments now spend more than $200 billion a year on administering health and human services programs.

Maximus has health and human services related contracts with 46 states, Mastran said. For example, the company has a $109 million contract with the state of California to enroll 2.4 million people into managed care programs. Under the contract, the company is educating residents and state government officials on managed care options, and providing a customer service hot line and a back office paper processing function. The contract, which was kicked off in October, will last three years.

Maximus also has a 12-year-old software product called Maxstar that can be configured to manage a child support program, a welfare program or a managed care program.

Herbert Birch, chairman of Birch & Davis, a $40 million consulting firm in Falls Church, Va., that specializes in Medicaid programs and managed care, said the growth of the industry will be tied to health and human services legislation at the federal and state level.

"Apparently, [legislation is] going to move very fast," said Birch. "There's going to be a lot of opportunity for companies in the industry."

One of the company's newest analysts said Maximus has established a strong position in the industry.

"The management has been with the company for a long time and it has always been profitable," said Neil Matlins, a portfolio manager for the Lincoln Fund in Springfield, Ill. "They were able to combine a variety of different disciplines to create a product that the public sector needs."

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