M&A

DynCorp International's owners seeking sale, report says

DynCorp International’s private equity owners are in the early stages of soliciting offers from potential acquirers of the defense services contractor, Reuters reported Wednesday.

Cerberus Capital Management has hired a pair of investment banks to help facilitate a sale that could have a price tag of around $1.3 billion, according to the report.

Officials from DynCorp declined our request for comment.

A sale of DynCorp would continue an active merger-and-acquisition environment amid increases to the Defense Department’s budget after several years of flat or declining budgets.

General Dynamics acquired CSRA in April for an added federal and defense IT footprint, while KBR has purchased three government services companies over the past two years to increase its public sector market reach and diversify revenue.

Cerberus acquired McLean, Virginia-based DynCorp in 2010 for $1.5 billion in a deal heavily supported by debt and took the company private four years after it undertook an initial public offering.

Founded in 1946, DynCorp became a government IT powerhouse in the 1990s and early 2000s before its acquisition by the former Computer Sciences Corp. in 2003.

CSC then sold three non-IT units of DynCorp to Veritas Capital in 2005 and the contractor then rebranded to its current  "DynCorp International" name. The IPO took place the following year. Cerberus took the company private again when it acquired it in 2010.

DynCorp’s revenue grew 9 percent last year to $2 billion, which broke a streak of four straight years of revenue declines from the $4 billion mark recorded in 2012. The company was one of the hardest-hit government services contractors amid the withdrawal of U.S. forces from Afghanistan and Iraq.

The company has also seen success in taking down its debt load in recent years. In a May 10 analysis note, credit ratings agency Moody’s Investor Service lifted its outlook on DynCorp and noted the firm’s aggressive debt reduction efforts plus an improving defense spending environment.

Earnings before interest, taxes, depreciation and amortization expenses doubled last year to $136.9 million and adjusted EBITDA margin climbed two percentage points to 7.6 percent.

Debt-to-EBITDA leverage ratio also declined to less than 4x last year from 7x in 2016, according to Moody’s. Analysts use that metric to estimate how many years it takes to pay down a company’s debt.

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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