Ross Wilkers

M&A

In KGS acquisition, ManTech eyes greater share of VA pie

In their most recent earnings call with investors on Feb. 21, ManTech International executives said acquisitions continued to be a top priority for them and were hopeful deals can happen if they make sense for them.

One of those is happening with Friday’s announcement that ManTech will pay $115 million to acquire Kforce Government Solutions, a subsidiary of the professional staffing firm Kforce. The KGS business posted nearly $98 million in revenue last year and has more than 500 employees.

In KGS, ManTech is looking to bolster its presence with civilian agencies and particularly the Veterans Affairs Department as that agency moves ahead on several of its large-scale technology transformation efforts.

“If you look at some of the broader, newer awards that are out there, you can see that they are working towards modernizing their infrastructure,” ManTech CEO Kevin Phillips told me Friday afternoon. “You can see they’re moving forward on some of these planned changes and I think it’s a good thing for them to be doing that.

“There are enough sizeable opportunities coming out over the next three years that our view is it’s a good time to enter that market and offer a compelling argument and position against those.”

Investment bank KippsDeSanto & Co. was exclusive financial adviser to Kforce on the sale of the KGS business to ManTech, whose most recent acquisition prior to KGS was that of InfoZen in 2017 for more IT modernization capabilities.

Some of those larger VA opportunities Phillips described are coming through the agency’s massive “T4NG” contract vehicle for services to help transform IT programs throughout the agency.

KGS brings to ManTech a prime position on that vehicle that runs through 2026. Analysts at investment bank Cowen & Co. estimate VA contracts represent nearly 60 percent of KGS’ annual sales.

Also as Phillips pointed out to me, the VA’s overall budget and IT funding within that is showing overall growth. The VA’s budget for fiscal year 2019 is 6 percent higher and broke $200 billion for the first time ever. Analysts at immixGroup estimated in November that the VA’s IT budget will hit $5.5 billion for fiscal 2019, up from the low $5 billion-range registered in the past two years.

KGS also touts the Health and Human Services and Homeland Security departments as among its federal civilian customers. Within the Defense Department, all four military services are clients along with the Defense Advanced Research Projects Agency, Defense Health Agency and Defense Intelligence Agency.

On the technology side, Phillips cited cybersecurity, data analytics and cloud computing as among the knowledge and skillset areas it has centered its acquisition strategy around.

KGS has “very similar capabilities around network services, software development, cyber and training… as applied to the specific mission set the customer has,” Phillips said.

The acquisition is anticipated to close by the end of March, pending regulatory approvals and other closing conditions.

KGS represents ManTech’s fourth acquisition in nearly three years and ninth in the past six years. Altogether, ManTech has made more than 50 deals since its 1968 launch and close to 30 as a public company.

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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