Vista Deals Build Market Presence

Vista Deals Build Market Presence

By Nick Wakeman
Staff Writer

Vista Information Technologies Inc. and its backers, which have snapped up three professional services and network management companies since last March, are about to seal another information technology deal.

The three pieces have created a company based in McLean, Va., with annual revenues of about $60 million, company officials say, although exact terms of the deals were not disclosed.

The fourth acquisition, which is set to close in January, will fetch another $10 million in revenue, said James Duggan, Vista's president and chief executive.

These businesses are the building blocks for a combined entity Vista officials hope will top $300 million in annual revenues during the next four years.

That's not bad for a company that was formed last March. Vista's acquisition trail started that month when it purchased General Analytics Inc. The McLean, Va., company provides geographic information systems, local area and wide area network management and telephony services.

In November, the former DynCorp executive's target was the professional services division of Net2000, a telecommunications and network management firm in Vienna, Va.

After the first acquisition, Duggan and Dunlop Scott, Vista's chief financial officer and executive vice president, developed the corporate structure and process for later acquisitions, Duggan said.

"We've got that in place, so now we are putting the building blocks in place for growth," Duggan said.

Growth through acquisitions will continue to be a major part of Vista's strategy but Duggan also expects 20 percent internal growth annually, he said.

The three markets Vista is targeting - professional services, network management and telephony - are growing in both the government and commercial sectors, Scott said.

Potential acquisitions are companies that have capabilities in those areas. But Vista officials want to establish a geographic presence in addition to their technology offerings, Duggan said.

"We need to be a nationwide company so we can travel with our customers," he said. "We are looking in all the major markets," including Atlanta, Boston, Chicago, New York, Charlotte, N.C., Texas and California.

So far, most of the companies Vista is eyeing are companies with annual revenues in the range of $10 million to $45 million.

While Duggan is anxious to buy more companies, the current market is a difficult one, he said. High-profile deals such as TRW Inc.'s purchase of BDM International Inc. raise the expectations of sellers, he said. Cleveland-based TRW purchased McLean, Va.-based integrator BDM for $1 billion.

Vista officials are approaching potential deals cautiously. Scott said they generally look at 15 companies for every one they buy. "We have to be able to live with the consequences of the deal," he said.

"It is getting harder to make deals," said Jon Kutler, president of Quarterdeck Investment Partners Inc., Los Angeles "Many sellers look at the BDM multiples and say, 'I deserve that,' but no, they don't."

The large deals "muck up the market for companies like Vista who want to buy companies at a reasonable price," said Douglas Schmidt, managing director for Legg Mason Inc., Baltimore.

In addition to higher seller expectations, Vista faces competition from other buyers, Duggan said.

But Duggan said Vista has "an exciting program" that people want to join. "We are trying to build a culture where people feel a sense of responsibility for growing the business."

In looking for companies to buy, Duggan and Scott are especially interested in companies with management teams that want to stay with Vista after the deal closes, Duggan said.

Vista officials are shooting for a business mix where 60 percent of overall revenues are commercial and 40 percent are government, Duggan said. Currently, the split is 70 percent government and 30 percent commercial.

"That ought to be the right strategy," Schmidt said. A strong commercial element will make Vista more valuable, he said. "The market isn't happy with federal companies."