MCR's New Owner Seeks Broader Contracting Portfolio

A Chicago investment firm has made its first move into the government contracting business, taking a majority stake in McLean-based MCR.

Harrison Street Capital is interested in helping MCR grow, possibly by acquiring other companies and consolidating their operations.

"Our investment focus is principally in the kind of growth-oriented yet recession-resistant health-care, education and infrastructure [areas]. And with this investment in MCR, we add essential federal services to this defensive yet opportunistic theme," said Harrison Street Capital co-founder Michael Galvin, who has taken on the role of MCR's nonexecutive chairman.

MCR's main client is the Defense Department, and it provides program management services such as strategic planning, risk assessments and logistics to the federal government.

Government contracting is considered a stable business in a recession because federal agencies and the military do not cut back in the same way corporate clients do. However, President Obama has said he wants to reduce the federal government's reliance on contractors.

MCR chief executive Neil F. Albert said he does not see that as problematic.

"We think that, if anything, we can help," he said, by supporting program managers and training new government hires.

Harrison Street's investment in MCR is set to be announced today, along with MCR's purchase of Aerodyne, an aeronautical engineering and technical consulting company in Huntsville, Ala.

The companies would not disclose terms for either deal. MCR said it expects Aerodyne to bump its annual revenue over $100 million, from about $80 million. MCR has more than 500 employees and Aerodyne has 75.

Even before Harrison Street took a stake in MCR, both companies had been looking to expand in the government contracting market. MCR felt it had outgrown its previous investor, and Harrison Street was looking for the right management team.

The companies plan to continue investing in the contracting market. MCR continues to look at expanding its non-Pentagon business and fill in gaps in its business.

"From my perspective, what we need is to look at broadening our capabilities so we can compete in a more aggressive manner," Albert said.

MCR had been looking at moving into the Huntsville market because of the Army's presence there. Albert said the company already has work in unmanned aerial vehicles with the Air Force and the Navy, and the Aerodyne deal gives it that work with the Army as well.

Galvin described Harrison Street as a longer-term investor that focuses its efforts around private equity, technology and real estate. It was founded by Christopher and Michael Galvin, grandsons of Motorola founder Paul Galvin. Christopher Galvin was Motorola's chief executive from 1997 to January 2004, when he was forced out. Michael Galvin has been in Washington before, serving as an assistant secretary in the Commerce Department from 1989 to 1992.

Michael Galvin said the investment in MCR comes principally from Galvin family money, and he expects to invest more in the McLean company. Outside investors have also expressed interest, he said.