DRC makes big acquisition, adding to D.C. growth

June 12, 2011

Days after opening a new headquarters in Arlington, Andover, Mass.-based contractor Dynamics Research Corp. significantly grew its local footprint with the purchase of Reston-based High Performance Technologies.

Early this year, DRC announced that it would relocate its local headquarters to a 37,000-square-foot office in Clarendon, where it would house its newly formed federal group and consolidate operations in Reston, Ballston and Crystal City. The company still maintains offices in Columbia, Edgewood, Falls Church, Crystal City and Dumfries.

As part of the move, Jim Regan, DRC’s chairman and chief executive, also relocated his office to the area.

Now, DRC has agreed to buy HPTi, which it said had $90 million in revenue in 2010. The company provides high-end technology to the Department of Veterans Affairs and intelligence agencies, among others. Nearly half its staff hold a master’s degree or higher and almost all have security clearances.

“This is a transformational event for DRC,” Regan said in a call with investors. “It will be the largest acquisition we’ve made.”

Under the merger agreement, DRC is buying High Performance Technologies for the cash price of $143 million. The deal is expected to close at the end of the month.

The acquisition is a sizable one for DRC and adds significant debt, said George A. Price Jr., senior equity research analyst for IT services at BB&T Capital Markets.

BB&T and its affiliates have relationships with a number of government contractors, including DRC.

“I do think it changes the risk profile of the company,” he said. “Is it a significant increase? No, but integrating an acquisition of that size . . . it does present some challenges.”

Price said DRC paid a high premium, but Regan said in an interview that the high-quality company was drawing multiple interested buyers.

“The competition was very keen,” he said. “We feel we paid a fair price.”

Timothy P. Keenan, president and chairman of HPTi, said the company had long turned down prospective buyers but increasingly saw that remaining a mid-sized firm would make it tough to compete. Its acquisition, he said, will now allow the business to take on bigger projects.

The acquisition boosts DRC’s roster by about 440 employees , mostly local, meaning a much stronger D.C.-area presence. DRC already had more than 600 people based in the area.

Regan said the move to Clarendon has made the Washington area the company’s operating headquarters, while its corporate headquarters, including its back-office functions, remain in Andover.

Many other contractors have moved their headquarters in recent years. Northrop Grumman, for instance, is in the process of relocating from Los Angeles to Falls Church.

“I think it’s probably a little overdue that [DRC] have a bigger presence and bigger focus in terms of physical footprint and management presence in the D.C. area, given the nature of their business,” Price said.

Comments
Show Comments
Most Read Business