More Bite - Size Deals On Menu, Analysts Say
More Bite - Size Deals On Menu, Analysts Say By Nick Wakeman Staff Writer The megamergers and acquisitions that rocked the federal information technology industry in 1997 have given way to smaller deals as many of the major players digest what they swallowed last year. Industry consolidation continued apace in the first half of 1998, but with more bite-size deals. One exception is the June 24 acquisition of Austin, Texa
More Bite - Size Deals On Menu, Analysts Say By Nick Wakeman The megamergers and acquisitions that rocked the federal information technology industry in 1997 have given way to smaller deals as many of the major players digest what they swallowed last year. CACI ended 1997 with the purchase of Government Systems Inc. of Wayne, Pa., for $35 million, and signed a deal in May to buy QuesTech Inc. of Falls Church, Va., for $42 million. Meanwhile, smaller companies like TimeBridge and Vista are practically building themselves from the ground up. TimeBridge is a $30 million a year spinoff from Sylvest Management Systems Inc. of Greenbelt, Md., now part of FDC. TimeBridge is partnering with Quarterdeck Investment Partners to find acquisitions in the commercial and state and local government markets. In May, TimeBridge bought Orbase Inc. of Denver, a $6 million a year database consulting firm. Vista began when a group of investors, led by James Duggan, Vista's president, bought General Analytics, McLean, Va., last year. Vista has made four acquisitions in the past year, including the June 22 purchase of the networking integration services unit of Johnson Controls Inc., Milwaukee. That pushed Vista over the $85 million a year mark. But both Duggan and TimeBridge's president Bill Strang eschew the notion of buying companies just for the sake of getting bigger. Both companies are looking at specific niches such as network services and application development. "If you don't put a good theme behind [the acquisitions], you won't do well," Schmidt said. But the big-is-better approach is still a good strategy, Kutler said. Rolling together several slightly related companies into a larger one still creates value because a $250 million company has economies of scale that a $50 million company lacks, he said. FDC and Anteon are good examples of government-focused companies building themselves quickly through roll-up strategies. "Plus, there is the whole issue of what happens to you if you don't get bigger," Kutler said. "You won't keep up." n
Selected 1998 IT Acquisitions
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