M&A

Vectrus adds intell, civilian footprints in $36M buy of Sentel

Vectrus has acquired IT and logistics services contractor Sentel Corp. for $36 million to add new intelligence community and civilian market footprints, as well as push to further create synergies between physical and digital infrastructures for agencies.

The deal announced Tuesday represents Colorado Springs-based Vectrus’ first acquisition in its almost three years of being an independent, publicly traded company. Vectrus is the former global services division of defense technology maker Exelis (acquired by Harris Corp. in 2015) and spun out of the former parent in 2014 as both companies sought greater focus on their core businesses.

The transaction also represents the government services market’s first major publicly announced deal so far this year after a strong 2017 for mergers and acquisitions of all sizes to add new technology-related offerings in areas such as space, defense, intelligence, IT modernization and cybersecurity.

Alexandria, Virginia-based Sentel reported $107 million in revenue for its fiscal year ended Sept. 30, 2017. Its federal customers include U.S. intelligence agencies, the Army, Navy, Air Force, Federal Aviation Administration and Internal Revenue Service.

Vectrus CEO Chuck Prow said in a statement the acquisition is part of the company’s move to further transform “into a higher value, technology-enabled and differentiated platform.” Prow added the deal also brings “immediate access to important clients in the intelligence community.”

Founded in 1986 and with over 600 employees, Sentel focuses its information services on spectrum management systems, sensor networks, perimeter surveillance systems and other detection systems. The company also manages major facilities, supply chains and assets as part of its global logistics service offerings.

Vectrus, which reported $1.2 billion in revenue for 2016, opened an IT and network communication operations center in Reston, Virginia two years ago to pursue additional business in that line of work.

Nearly 22 percent of that revenue was in IT and network communication services with the remaining 78 percent in facility and logistics services, according to a September 2017 investor presentation to the RBC Capital Markets Global Industrials Conference.

Almost 84 percent of Vectrus’ revenue in 2016 came from contracts with the Army, the company said in its most recent annual 10-K regulatory filing with the Securities and Exchange Commission.

The acquisition of Sentel was funded by cash on hand and Vectrus’ credit facility.

McLean, Va.-based investment bank Bluestone Capital Partners was Sentel’s financial adviser for the transaction. Bluestone merged into the aerospace, defense and government services group of fellow investment bank Houlihan Lokey in December.

Rennaissance Strategic Advisors was Vectrus’ strategic adviser and Faegre Baker Daniels was legal adviser. Pillsbury, Winthrop, Shaw, Pittman was legal advisor to Sentel and BDO USA LLP was tax adviser.

About the Author

Ross Wilkers is a senior staff writer for Washington Technology. He can be reached at rwilkers@washingtontechnology.com. Follow him on Twitter: @rosswilkers. Also find and connect with him on LinkedIn.

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