January Defense Federal Technology Market Update – 2011 Year In Review
We invite you to read our January 2012 Newsletter, featuring the following topics:
*2011 Industry Reflection
*2011 M&A Activity and Notable Transactions
*2012 Government Services M&A Outlook
*Government Services 2011 Industry Performance
*Public Company Metrics
*Recent Defense & Government Services M&A Transactions
Click the following link for a complete pdf file of the newsletter: http://www.aronsoncapitalpartners.com/index.php/2011-12-13-21-06-12/monthly-newsletter/item/january-2012-market-update?category_id=6
NY Times – The Age of Big Data
Big data continues to draw attention and is setting up to be the next “big thing” in Federal IT M&A.
Full article: http://www.nytimes.com/2012/02/12/sunday-review/big-datas-impact-in-the-world.html
Semantic Technology, Social Media Analytics and the Intelligence Community
The proliferation of information and data in open source
social mediums such as Twitter, Facebook and a variety of blog hosting sites
continues to shift the analysis of these vehicles from manageable to
overwhelming, unless of course an entity has the right technology. Social media
comprehension is an essential capability in the Intelligence Community’s (“IC”)
goal to “connect the dots.” One of the keys to unlocking this much-needed
capability is semantic technology.
Semantic technologies include the processing and analyzing of
structured and unstructured data, concepts and relationships, content tone and natural
language. These technologies require more than indexing content; they require
algorithms and sophisticated ontologies in order to understand contextual
meanings. When tracking social media, these technologies need to understand
sarcasm, figures of speech and other rhetorical devices for a complete and
accurate computational analysis.
IC members like the FBI and CIA are actively practicing and developing
semantic processing techniques to analyze social media. In the past, the FBI
has used social media to apprehend criminals. Now, the FBI seeks greater utilization of social
networks as indicated in its recent RFI (posted on January 19, 2012), requesting
market research to determine the capabilities for an “open source and social
media alert, mapping and analysis application solution.” The FBI hopes for
social media semantic technologies to improve its situational awareness and
identify/locate emerging threats.
The CIA’s Open Source Center, led by Director Doug Naquin, is
another example of the IC’s priority to analyze the open source social media
outlets. The Open Source Center monitors up to 5 million tweets per day—a
significant amount but still only 2.5% of the total 200 million tweets
generated each day. Stories of success in this new age of intelligence
gathering also show the IC’s current limitations. For example, the Open Source
Center foresaw the uprising in Egypt; however, the center had no indication of
the timing of when such an event would occur.
The Intelligence Community will continue to demand key
capabilities like semantic technologies in order to harness the full benefits
of what is considered the “Big Data” problem, and large integrators will pay
premiums for companies that provide them access to these capabilities.
To further discuss our analysis of the
Intelligence Community and recent M&A activity, please feel free to contact
Jensen Vessels at jvessels@aronsonllc.com.
Defense M&A: Corporate Spinoffs
The recent speculation that Textron is considering a spinoff of some of its business units, including Cessna Aircraft, is revealing of a growing trend in which diversified conglomerates face pressure from activist investors to dispose of certain defense-related business units. Rumors of a possible sale of the Cessna business unit have been fueled by the reported interest of activist investor Ralph Whitworth’s Relational Investors. According to Reuters, Relational Investors examined Textron as a potential target for a change in strategy a month ago; however, the activist firm has since stated that Textron was never a serious prospect.
Activist investors, like Relational Investors, have determined the slower growth federal contracting verticals of large conglomerates to be a drain on company valuations. To unlock shareholder value, investors are pushing for breakups or spinoffs of segments with a stagnant or declining growth outlook. These changes come as the wars in Afghanistan and Iraq wind down and major cuts are being made to the U.S. government’s defense budget. With the growing deficit and increasing budgetary strain, the trend of spinning off low-growth businesses from diversified conglomerates is likely to continue into 2012, with or without investor pressure.
Relational Investors has been known to pressure diversified conglomerates to split up in recent years. In October 2011, ITT Corporation spun off Exelis Inc., its Defense and Information solutions business, and Xylem Inc., its Water Technology and Services business, resulting in three distinct publicly traded companies. Relational cofounder Ralph Whitworth told Reuters that the hedge fund urged the company to sell its defense unit to a private equity firm and spin off its basic industrials business after accruing a 3.93% stake in the company and nominating three directors to the company’s board. ITT instead announced its two planned spinoffs, possibly in order to avert a proxy contest with Relational Investors, although ITT’s Chairman and CEO, Steve Loranger, maintains that the decision to break up the company was made with no investor pressure.
Relational also played a role in the pending spinoff of certain government services operations of L-3 Communications, which is expected to be completed in the first half of 2012. The firm became the largest shareholder in L-3 in June 2011 after acquiring an almost 6% stake in the company, when it began pushing for the conglomerate to spin off its low-margin and slow-growth businesses.
Top M&A Deals of 2011-Aronson Capital Partners selected as advisor to Best Foreign Deal
Washington Technology, in its annual round up of the Top Mergers & Acquisitions in the government contracting industry, selected Ultra Electronics, plc.’s acquisition of Special Operations Technology (SOTECH) and Zu Industries as the Best Foreign Deal of 2011. Aronson Capital Partners served as the exclusive M&A advisors to both Sotech and Zu on this notable transaction. Washington Technology stated that, “Acquisitions by foreign buyers slowed in 2011, so this deal is significant”. The combination of SOTECH’s comprehensive operational support on programs targeted at transnational organized crime and Zu’s proprietary communications surveillance and analytical products made these businesses highly coveted acquisition targets. ACP’s experience advising companies serving the intelligence and law enforcement markets provides us unique insight into these agencies’ missions. On this transaction we were able to leverage this knowledge along with our extensive relationships with domestic and foreign strategic buyers to create a highly competitive sales process.
http://washingtontechnology.com/pages/slideshow/slideshow-main-page.aspx?framepage=sl_top_mergers2011/0.aspx
Pre-liquidity Planning for Business Owners
It is typical for business owners to begin preparing their company for sale once they’ve decided to sell – by then it might be too late. In reality, the preparation process should begin years in advance of that decision. In fact, serial entrepreneurs will tell you that they begin the process the day they launch the business. With the benefit of lessons learned from hind sight, they fully understand the impact that pre-liquidity planning can have on the eventual sale of a business. What most entrepreneurs fail to understand is that many of the more challenging issues that come up during a sale are very difficult if not impossible to address, while with advanced preparation, these issues can usually be easily resolved or mitigated.
Whether it is a tax issue that will directly impact the net proceeds to the shareholders, a government contract compliance matter that could create undue concerns for a prospective buyer, or a concentration of revenue from set-aside contracts, the right advisors can assess the matter and provide practical solutions to resolve or address the issue. Simply put, a lack of advance planning can erode the economics of a deal through higher taxes, larger escrows and reduced valuations.
Aronson Capital Partners has completed over 50 transactions in the government contracting space. We have seen the pitfalls and issues that can negatively impact value or cause a deal to fail. We
have developed a methodology to perform a strategic assessment to be used as a pre-liquidity planning tool for business owners. Contact us to discuss how we can help.
GovConNet Institute: Priming Companies for Growth – February-March 2012!
GovConNet Institute provides advanced training to Federal government contractors in the transitional stage with the real world tools and knowledge needed to succeed at the next level and increase owner value. The course is instructed by MCCC GovConNet expert professional service providers. Subject matter is geared for winning and profitably maintaining Federal government contracts. More information is provided on the Montgomery County Chamber of Commercce GovConNet website. http://www.montgomerycountychamber.com/govconnet/govconnet-institute-priming-companies-growth
Montgomery County Chamber of Commerce GovConNet is sponsoring their second NIST Industry Day Feb. 8, 2012
To be held on the NIST Gaithersburg Campus: 100 Bureau Dr., Gaithersburg, MD 20899
Agenda:
- 8:00am – Registration, Exhibits/Networking, Continental Breakfast
- 8:30am -10:30am – Program
- 10:30am -11:30am – Exhibits/Networking
This is an opportunity to hear from the leadership of NIST about their expanded national mission including their planned $70M multi-award cybersecurity contract. For the first time, participants will also be able to meet representatives from many of the NIST Operating Units at exhibitor tables. Attendees will also have the opportunity to speak one-on-one with the panelists and network with fellow government contractors.
Featured Speakers:
- Dr. Willie May, Associate Director for Laboratory Programs, NIST
- George Jenkins, Chief Financial Offier, NIST
- Barbara Guttman, Information Technology Laboratory, NIST
- Paul Brand, NIST Center for Neutron Research
- TBA, Cybersecurity
- Malda Brown, DOC Procurement Center Representative, SBA
- Barry Berkowitz, Director, Department of Commerce, Office of Acquisition
December Defense Federal Technology Market Update
We invite you to read our December 2011 Newsletter, featuring the following topics:
*Commentary on Recent M&A & Public Company News
*Government Services 2011 Industry Performance
*Public Company Metrics
*Recent Defense & Government Services M&A Transactions
Click the following link for a complete pdf file of the newsletter: ACP Monthly M&A Update – December Edition
Blog Contributors
Categories
- Big Data
- Cloud Computing
- Cybersecurity
- data analytics
- Deficit Reduction
- Divestitures
- federal cybersecurity
- Government Contractor
- Homeland Security Cyber and Physical Infrastructure Protection Act
- Intelligence Community
- IT security
- M&A
- Management Consulting
- pre-liquidity planning
- surveillance
- Systems Engineering
- Training
- Uncategorized