Ross Wilkers

M&A

What comes after Parsons' IPO?

(NOTE: This story was updated Tuesday to reflect additional shares in Parsons being issued)

Parsons Corp.'s return to the public markets last week raised an estimated $462.9 million in net proceeds after deductions for underwriting discounts, commissions and estimated offering expenses.

Centreville, Virginia-based Parsons opened for trading on the New York Stock Exchange Wednesday with 18.5 million shares offered to public investors at an initial price of $27 each.

Then on Tuesday, the underwriters of Parsons' IPO exercised their option to purchase 2.8 million in additional shares and again at $27 each.

That brings the total net proceeds of the IPO to $533.8 million after discounts and expenses, well above the target Parsons was hoping for.

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Even when factoring in the overall market turmoil, Wall Street’s initial response to Parsons has been positive so far. The stock closed up 11 percent to $30.07 on day one of trade Wednesday and hit a high of $31.44. Parsons’ stock ended Friday at $30.84.

Previously a publicly-traded company between 1969 and 1984, Parsons’ return to the public markets was the first IPO that mattered to the government market since Booz Allen Hamilton’s similar deal in 2010.

As CEO Chuck Harrington explained to me last week, going public again was always in the back of Parsons' collective mind since he and his fellow employees acquired the company in 1984.

Do not just take that point about the IPO's significant from me however. Watch this Wednesday CNBC interview with Harrington on the NYSE floor.

Any time a contractor CEO like Harrington gets interviewed on CNBC it brings the federal marketplace more to the forefront of the mainstream business community (meaning outside of Washington, D.C.). It is also worth highlighting how Parsons is described by the hosts and the questions Harrington is asked.

The company is introduced as one of the "biggest government contractors." At $1.4 billion in federal revenue last year, that is one side of the story Parsons is telling about itself along with its critical infrastructure piece.

That book of federal business is also the crux of a question co-host David Faber -- the gold standard of TV business reporters -- asked almost a minute in about budget headwinds and possible sequestration cuts and other disruptions such as government shutdowns.

In a similar vein to other contractors, Harrington told Faber that Parsons is focusing on areas like cyber, space and intelligence that it views as relatively insulated from spending reductions.

Cybersecurity and space happen to be "the two new domains for warfare going forward," as Harrington said in that interview.

Where Parsons sees itself gaining market share is in projects as at the convergence of the digital and physical domains. As Harrington told me via phone, that means a focus on “how you bring the software and systems together, and what is the infrastructure that’s needed.”

Also under the umbrella of that convergence is airports, railways and urban areas.

For Parsons, they also join a group of four other global engineering companies that are publicly-traded and have built substantial footprints in the federal technology landscape in the past decade.

Proceeds from the IPO will go toward paying down debt and investments in key technology areas, Harrington told me in our phone interview. Parsons also will use some of the funds for a $52.1 million IPO dividend.

Further acquisitions also cannot be discounted given how active Parsons has been as a dealmaker in this decade, particularly in its defense and intelligence business.

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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