Are we in a new era of mega-deals?
CSRA’s recent Securities & Exchange Commission filing does a good job of giving a blow by blow of how its mega deal with General Dynamics came to be.
The company showed itself to be a shrewd negotiator.
But there is another observation I want to make that has nothing to do with CSRA or GD.
The other two suitors were CACI International and Science Applications International Corp. And while the two companies came up short in their bid for CSRA, the attempt says a lot about them.
They both are prepared to marshal substantial resources to go after a property they want. Both were ready to sign deals worth $6.6 billion.
When you have the capability to pull together those kinds of resources, the universe of potential takeover targets grows exponentially. The M&A landscape has shifted.
But don’t look for them to buy just anyone.
CSRA is a special property. They have great margins and several long term contracts. Recent wins include MilCloud 2.0, worth about $500 million, and the NSA’s Greenway infrastructure contract worth $2.4 billion, and Army Flight School XXI, a 20-year contract it won in 2003.
CACI CEO Ken Asbury said recently that CACI isn’t looking to buy scale so size won’t be the sole criteria. But at the same time, I’ve always been told that it is just as hard to integrate a small acquisition as a large. So why not go for the large?
They may not feel pressure to get to the same scale as GD-CSRA and Leidos but if anything, the CSRA filing tells me that CACI and SAIC are ready to make deals and they can make big ones. Nothing is out of reach for them.
Posted by Nick Wakeman on Mar 08, 2018 at 9:25 AM