Anteon Acquisitions, Yes; Public Market, Not Yet

Anteon Acquisitions, Yes; Public Market, Not Yet

Joseph Kampf, Anteon's president and chief executive officer, told Washington Technology last week he expects to sign at least one more acquisition agreement by year's end.

"We are currently shopping in the $50 million to $150 million range," Kampf said, referring to the size of potential acquirees by annual revenue.

Joseph Kampf

In May, Anteon closed on its acquisition of Techmatics Inc., a Fairfax-based contractor with $70 million in revenue. Last August, Anteon snapped up Vector Data Systems of Alexandria, Va. - a $25 million player.

Kampf expects Anteon's annual growth rate to move from the 30 percent range to around 50 percent through additional acquisitions. That will put Anteon's top line at $260 million this year and at $500 million in 24 months.

Only then, Kampf said, will he entertain the prospect of taking his company public.

Under Kampf's tutelage, Anteon has several clear-cut objectives:

• Build profit margins. The company had profit margins of less then 2.5 percent when it was sold by Ogden. Margins are now over 6 percent and should be 7 percent to 8 percent in the near future.

• Seek acquisitions that will not only add revenue, but will add technological capabilities, profitability and inroads with new customers.

• "We have looked at 95 percent of the deals that were done in this industry in the last two years. So far, we have only signed two of those deals," Kampf said of his selectivity.

• Stay focused in the federal market. About 95 percent of Anteon's work is with the federal government. While Kampf would entertain the idea of buying a commercial business, he noted most federal contractors that have tried to transition into the commercial market have failed.

• "I don't want to step into the same pit," he said.

• Broaden the amount of non-Department of Defense federal work that the company does. Sixty-five percent of Anteon's revenue comes from Defense Department projects. But the company has signed substantial deals with the Federal Emergency Management Agency, the Environmental Protection Agency and the departments of Commerce, Energy, Interior, Justice and Transportation.

"It's a bit refreshing. We always hear from companies that want to go public but aren't ready. Anteon is ready but doesn't have to go," said Bill Loomis of Legg Mason Inc.

"Because they have strong financial backing, the company has the luxury of doing things when the time is right instead of when they need to do them," said Gail Dady, managing director of Quarterdeck Investment Partners in Washington, a mergers and acquisitions boutique that caters to the information technology market.

Dady, whose firm helped orchestrate the buyout of Anteon from New York-based Ogden, said deep pockets have helped Anteon in more ways than just preparing for the public market. With acquisitions, she said, the company has no pressure from outside investors to sign deals that are not prudent.

"They're not stingy, but they don't have to overpay just to bulk up, either," Dady said.

Anteon is in this favorable position thanks to its majority investor, Caxton-Iseman Capital Inc., a leveraged buyout firm in New York. Caxton bought the majority stake in Anteon from Ogden, leaving a minority investment for Kampf and other senior executives.

Caxton wanted to take a hands-off approach to managing the company and recruited Kampf to take charge.

Kampf, a finance whiz who got his start as an analyst for U.S. billionaire shipping tycoon D.K. Ludwig, had most recently served as executive vice president of Vitro Corp., a Montgomery County, Md., business bought by Tracor Inc. of Austin, Texas, four years ago for $94 million.

Kampf estimated Anteon has increased in value 15-fold for its investors during the past two years.

However, he said, Caxton is not interested in pushing Anteon to the public market quickly to get a simple return on its investment and then walk away from the company.

"They are in this for the long haul," Kampf said. "Besides, I'm not anxious to spend 40 percent of my time servicing Wall Street. Most CEOs don't rate analyst calls as a very fun activity."

Still, analysts who cover the government information technology market would love to see Anteon go public.

"They have a really good strategy," said Bill Loomis, an analyst with Legg Mason Inc. in Baltimore. "It's a bit refreshing. We always hear from companies that want to go public but aren't ready. Anteon is ready but doesn't have to go."

"Do they need to wait until they are $500 million? No," said Tom Meagher, an analyst with Ferris, Baker Watts Inc. in McLean, Va. "But there's certainly nothing wrong with waiting if they can. They are one of the most patient players in the market."