TASC sale triggers more questions
Now that Northrop Grumman has found a buyer for TASC
a couple questions still need to be answered.
Foremost is who is next? Who else, particularly among the large defense companies, will be selling a division or groups of contracts for technical and engineering consulting services?
In some ways, Northrop Grumman may have had it easier than most. TASC has survived two major acquisitions and has remained intact as a standalone unit. It was its own business and then was acquired by Litton Industries, which kept it as a separate division, and then Litton Industires, which also included PRC, was acquired by Northrop Grumman.
I challenge anyone to find anything official with the name PRC on it, but TASC remains.
So selling it was likely easier and cleaner than having to cleave units and contracts to get out the parts sensitive to organizational conflicts of interest (OCI).
In some ways, the government did General Dynamics a favor in 2006 when it forced the company to sell off the portion of Anteon International that provide similar services when General Dynamics bought Anteon. To complete the acquisition, General Dynamics sold about $200 million worth of Anteon to Alion Science and Technology.
We’ll keep talking to companies to see if they have business units or contracts that they expect to sell to comply with OCI rules. I’m not holding my breath about getting any answers because I know companies are loathe to talk about potential divestitures. But we have to ask.
The other question I have is what kind of company will TASC be?
Private equity such as General Atlantic and Kohlberg Kravis and Roberts work with certain timeframes. It won’t be too many years before they’ll want some sort of exit to recoup their investment.
The most likely scenario is public stock offering. TASC is of a size that few other companies can buy it, so TASC likely will remain independent.
My guess is that TASC will be an aggressive buyer, looking at other providers of systems engineering and technical advisory consulting services as acquisition targets.
Some of these services are what the government wants to bring back inhouse, but the reality is that the government will always need contractor support for highly technical acquisitions.
With those kind of market conditions, TASC and its investors might find themselves in a ripe position.
Posted by Nick Wakeman on Nov 09, 2009 at 9:53 AM