NIC Makes Federal Splash

By Nick Wakeman


National Information Consortium Inc. of Overland Park, Kan., made a strong move into the federal electronic commerce market by acquiring eFed, a division of Electric Press Inc. of Reston, Va., in a $29.6 million stock and cash deal.

The deal would have been impossible if NIC had not completed an initial public offering in July, said NIC Chief Financial Officer Kevin Childress. "We wouldn't have had the cash and we wouldn't have had the stock value," he said. "Being a public company was the key."

With eFed, which will operate as a wholly owned subsidiary, NIC gets an opening into the federal market and technologies for developing and operating online procurement systems, Childress said.

Currently, NIC has a run rate of $53.2 million in annual revenue from building and operating electronic commerce sites for nine states and the city of Indianapolis. eFed, which has developed procurement sites for the Air Force, Army, Navy, NASA, and the General Services Administration, should bring in another $5 million this year, Childress said.

NIC brings to eFed a business model that should help it capture even more federal business, said Robert Main, president of eFed. NIC does not charge its customers to build e-commerce systems. Instead, it reaps its revenue from savings in operations and transaction fees.

"They have been very successful with their shared-risk model and we see the federal market transitioning that way," Main said.

"I think this is an absolute bull's eye, a home run," said Jim Pettit, an analyst with the investment firm Hambrecht & Quist in San Francisco. While the market for procurement systems is relatively small today, "by all accounts it is just beginning to gain momentum," Pettit said.

NIC is still on the acquisition trail, especially for other electronic commerce targets in the federal and local government space, Childress said.