WT Business Beat

By Nick Wakeman

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Best deals of 2018 already happening

UPDATE: If we needed any more proof for our thesis that the merger-and-acquisition activity in the government market is strong and dynamic, we got it this weekend when CACI International renewed its pursuit of CSRA.

CACI upped the value of its bid but that doesn't mean it'll automatically prevail.

But successful or not, M&A in the government is not static, so while looking back at the deals that closed in 2017, it also is important to look forward at what the year ahead will bring.

And this year, it is particularly noteworthy because two of our top dealmakers from 2017 are already acquisition targets for 2018.

ECS Federal is being acquired by staffing services firm On Assignment for $775 million. The deal is expected to close by April 2 and the current management team led by CEO George Wilson will stay in place. “Same strategy, same management ream, more resources,” he said.

General Dynamics is buying CSRA for $6.8 billion in cash. [NOTE: As we send at the top, this situation is fluid.] This will create a federal IT powerhouse at $9.9 billion in annual revenue. That deal is expected to close before the end of June.

In May, we expect the closure of the complex three-way deal that will merge the U.S. public sector business of DXC Technology with Vencore and KeyPoint Government Solutions. This will create a new publicly-traded contractor with about $4.3 billion in annual revenue.

And Northrop Grumman is in the process of acquiring Orbital ATK for $7.8 billion in cash to further expand in space, a critical market for contractors becoming even more so. That deal could close before the end of June. 

These are all early candidates for the top deals of 2018. But they also will be newer and larger players in the market, so we expect an impact beyond just M&A activity.

But if 2017 with its 103 closed deals is any indication, these three deals won’t be the only ones that will reshape the public sector competitive landscape.

CACI International is always active and was a serious contender for CSRA, [and apparently still is] as was Science Application International Corp. Both showed they have the resources to make large deals.

And this is pure speculation, but Leidos is a good two years past the acquisition of the former Lockheed Martin IT business. That integration is complete, so Leidos could return as an active M&A player.

There will be no shortage of buyers over the next 12 months.

Click here for more analysis on the 2017 deals and our picks for the best deals of the year.

Posted by Nick Wakeman on Mar 19, 2018 at 10:06 AM


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