Equity partner in hand, start-up looks to buy

By Marjorie Censer
Monday, May 3, 2010;

By Marjorie Censer

Following the sale of his information technology firm -- which provided services to the defense, civilian and intelligence communities -- Brad Antle is starting over, founding a new company and looking to make its first acquisition.

Antle's latest venture, backed by private equity, is entering an increasingly competitive acquisition and merger market for government contracting firms. In the wake of the economic crisis, observers say the industry has become increasingly appealing for investors looking for more predictable returns.

For Antle, it's deja vu. In 2008, the North American arm of Serco Group of Britain purchased Antle's 10-year-old SI International, based in Reston.

Antle and his team in late summer 2009 put together a business plan for a new company, Salient Solutions, and went looking for an equity partner. By fall, they had settled on Frontenac -- the same investment firm that backed SI -- and the Fairfax-based company is now trying to make its first purchase.

This time around, Antle is working with a larger pool of private money and seeking a company with $75 million to $150 million in annual revenue and experience in a mix of growth areas including cybersecurity, health, energy and intelligence.

But he's not the only one who sees opportunities. Ed Bersoff became chairman, president and chief executive of ATS Corp. in McLean after establishing a special-purpose acquisition company, raising money through a stock offering and buying the firm more than three years ago. Today, ATS -- which has grown through additional acquisitions -- contracts with civilian federal government agencies, the Defense Department, the Department of Homeland Security and commercial markets.

In pursuit of additional acquisitions, Bersoff's company is now investing more in business development.

"More investors get it now; they understand the return dynamics and the stability inherent in the federal government market space," Antle said. "Ten years ago, most equity guys thought it wasn't sexy enough. They were looking at dot-coms, they were looking at telecom, they were looking at other places that were much hotter with the promises of much greater yields."

John Hagan, managing director and co-head of the defense and government services unit of BB&T Capital Markets/Windsor Group, said about 50 different firms have invested in the market, while roughly 150 have expressed interest, just in the past six years.

The question now is how long will the interest last, said Todd Stottlemyer, who with a partner launched government contracting firm Apogen Technologies in 2003 backed by private equity firm Arlington Capital Partners. Apogen was sold to British firm Qinetiq in late 2005.

"What I've seen in the last couple years has been this significant proliferation of players who've never been in the space before -- coming from all walks of life and different parts of the country -- now wanting to invest in this space," Stottlemyer said. "Are these long-term players or not? And I think that's an open-ended question."

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