Engility to buy Dynamics Research for about $120 million

Chantilly, Va.-based Engility, the government services contractor created through a spin-off from L-3 Communications last year, said Monday that it has agreed to buy Dynamics Research Corp. for about $120 million.

The deal hints at coming consolidation within the government services industry, as contractors adapt to shrinking federal spending. DRC itself made a major acquisition in 2011, buying Reston, Va.-based High Performance Technologies.

Engility said Monday it will pay $11.50 per share in cash for all the outstanding shares of DRC common stock. Based on about 10.4 million shares of outstanding stock, the deal is worth about $120 million.

Engility has tried to carve out a new space in the government services industry, focusing on cutting costs to meet government needs. Tony Smeraglinolo, Engility’s president and chief executive, said the acquisition would help the company expand and diversify its work.

For example, he said, 75 percent of DRC’s revenue comes from customers who do not work with Engility. Although about 75 percent of Engility’s revenue comes from Pentagon customers, about half of DRC’s revenue is unrelated to Defense Department agencies.

“Engility and DRC are very complementary,” he said during a morning call with analysts.

Although DRC is based in Andover, Mass., the company has a significant D.C. area presence, including a large office in Arlington’s Clarendon neighborhood, which serves as its local headquarters. Specializing in engineering, IT and technical consulting, DRC has more than 300 active contracts and more than 1,100 employees. The company has estimated revenue in 2013 of about $275 million, according to Engility.

Engility said it expects the deal to close in early 2014.

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