Booz Allen could be on the hunt

As government contractors brace for spending cuts, acquisitions remain a compelling option — and now even some typically reluctant buyers are considering jumping in.

McLean-based Booz Allen Hamilton made its most recent acquisitions in 2003 and 1999, when it bought the Japanese unit of Capgemini and the Scandinavian firm Carta Corporate Advisors, respectively.

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But speaking at a defense and aerospace conference last month, Samuel R. Strickland, Booz Allen’s chief financial officer and chief administrative officer, said the company is considering potential buys.

“One of the questions we get asked a lot is what do we intend to do with our excess cash,” he said. “We do generate a lot of cash.”

Strickland said the contractor has paid down substantial debt.

“While we have never been acquisitive, and we don’t have a corporate development staff out beating the bushes for acquisitions, it’s conceivable we could do an acquisition at some point in time, particularly given the pricing in the industry,” Strickland said.

John Hagan, head of the defense and government services unit of BB&T Capital Markets/Windsor Group, said companies are continuing to look for mergers and acquisitions that will help them strengthen or establish footholds in industries expected to grow, which generally include cybersecurity, health information technology and intelligence and surveillance, among others.

“Whenever there’s dislocation in a market, there’s M&A,” Hagan said. At Booz, “the culture is changing, and I think they are exploring it. Whether they’ll actually do something or not, we’ll have to see.”

Just as strongly as Booz Allen has stayed out of the M&A world, others have made it a central part of their strategy.

At Arlington-based CACI International, for instance, the company has made 54 acquisitions in the past 20 years.

Paul M. Cofoni, CACI’s president and chief executive, said in an interview that the company looks at about five companies for every one it acquires.

The “number one source of failure is misreading the growth prospects,” Cofoni said of companies that make poor acquisitions. “The other place you can get in trouble is when there’s a cultural mismatch.”

Indeed, sometimes the best bet for the long run is to build what already exists.

“If that company is able to achieve growth organically, they’re in a better position to be selective about when and if they do acquisitions,” said Hagan of BB&T. For Booz Allen, which has historically posted strong organic growth, “if they can continue to grow in that manner, that’s the least risky form of growth and the most valued form of growth.”