Ross Wilkers

M&A

How the Amentum-DynCorp deal came to be in a COVID world

DynCorp International’s soon-to-be former private equity owners reportedly kicked the tires two years ago on a sale process after nearly eight years of owning the government services company.

Now in year 10 of their investment, Cerberus Capital Management has inked a deal where it will sell DynCorp for an undisclosed sum to another private equity-backed government services company in Amentum.

In speaking with Amentum CEO John Vollmer on Friday, one main goal of that conversation was certainly to hear more about what acquiring DynCorp does for the buyer and why so soon.

There is also the aspects of how that deal came to be amid the broader, unusual environment it is taking place in and what that market-wide picture looks like.

One point that helped Amentum was its familiarity with DynCorp’s business as both companies had talked in the past about teaming on certain contract pursuits. So the executives on both sides knew each other, including Vollmer and his DynCorp counterpart George Krivo.

Familiarity takes on a different meaning in each transaction. But for this one also consider Amentum’s private equity owners in American Securities and Lindsay Goldberg, the latter of which once owned PAE.

“They have looked at DynCorp before (and) in actuality, DynCorp and Amentum had deep discussions last fall,” Vollmer told me. “There was potential deal making going back as far as last fall when we were part of AECOM.”

What was going on last fall? AECOM was near the end of a process to evaluate offers for its management services segment, which then became Amentum in February of this year.

Before that in June 2019, AECOM revealed an initial plan to spin off the management services business into a new publicly-traded government services company. A subsequent auction process that saw American Securities and Lindsay Goldberg win out took AECOM in another direction.

Fast forward to where the world is now amid the coronavirus pandemic that requires extra caution for any in-person gatherings no matter the size, all as talks regarding this deal gradually accelerated and got deeper.

Virtual negotiations and remote due diligence, including the much-needed digital data rooms, are now the norm for getting mergers and acquisitions across the finish line.

“Everybody’s getting a little better at this,” Vollmer said with a joke that he can “remember when data rooms were paper.”

“Companies are getting much better and brokers are getting much better at executing deals digitally, so the data rooms and the discussions happen quicker and easier, and with more fidelity than they used to,” Vollmer added. “The whole industry has ramped up the ability to execute big deals like this more virtually.”

Also apparently ramping up in conjunction with that -- prospective buyers looking to do such a natural pause when the pandemic first became such in March.

“What I’m seeing in the market right now is a certain amount of pent-up demand here,” Vollmer said. “Since March, things kind of shut down and they are definitely breaking free right now. We are seeing a big pipeline of potential acquisitions and I’m certainly expecting that to pick up.”

Back to the virtual nature of work these days as that also underlies how companies do everything now, including but not limited to business development, capture and proposals.

Some of those proposals delivered remotely and through oral presentations (also remotely) are for contracts of the multi-billion dollar variety.

Those are among several adjustments seen throughout the government market to keep the support going for essential missions that largely go on during the pandemic. Contrast that with some commercial sectors turned upside down.

“Maintaining the power of the teams that are working on those jobs is critical to our clients, so from that perspective the government services business has really withstood most of the negative impacts,” Vollmer said.

Count Vollmer as among those who believe the landscape and the business models in it will see permanent changes, namely more remote work and less travel. But that also means Amentum and the entire industry has to “up the game digitally” and improve systems to do that,” Vollmer said.

“We have to get better at communicating and delineating what we offer and how to convey that to a client,” Vollmer said. “We’re expending capital to up our IT systems, our video systems, our training of people to work more seamlessly in a remote environment. ... I see that happening with all our competitors in the market. We’re all doing that because we all truly believe that is what the future is going to look like.”

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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