Bethesda-based Catapult Technology became the latest private equity-owned contractor last week when District-based D.C. Capital Partners picked up the company.
The purchase — the terms of which were not disclosed — adds to the private equity firm’s portfolio of federally focused companies. D.C. Capital Partners has already put together McLean-based KS International, an engineering and development firm focused on the federal government, by combining several acquisitions.
In recent years, the contracting industry has been increasingly embraced by private equity firms seeking stable returns. In one high profile purchase, private equity firm Providence Equity Partners bought Fairfax-based SRA International last year for nearly $1.9 billion.
Still, while some private equity firms remain interested in the market, others are taking a harder look, concerned by the uncertainty in the industry created by budget reductions, an upcoming presidential election and the threat of even larger spending cuts next year.
At Catapult, company officials were prompted to seek investors as founder Randy J. Slager, a service-disabled veteran, faced growing health problems, said Mark E. Hunker, who becomes Catapult’s chief executive and president under the deal with D.C. Capital. Still, he said, the leadership did not want to sell the company to a larger contractor.
We “didn’t feel that Catapult was done yet,” said Hunker, noting that the company had bought back-office systems and pursued certifications sized for a larger company. “We really went big ... so we definitely felt we were not done with the vision.”
Catapult, founded as a small contractor in 1996, now has 646 employees, more than 450 of whom are in the Washington area, and posted close to $150 million in revenue in 2011. With last week’s deal, Slager will retire — though remain on the board of directors — and Hunker will advance from his position as Catapult’s chief operating officer.
The rest of the company’s management team is set to remain in place.
As part of the acquisition, Catapult will be held in the same holding company as D.C. Capital Partners investments Fairfax-based Strategic Intelligence Group and District-based Kickstand.
Hunker said the companies will remain independent but be able to partner, potentially increasing Catapult’s customer base. Additionally, he said Catapult will have an infusion of capital to help it grow.
Kevin DeSanto, co-founder and managing director of McLean-based investment firm KippsDeSanto, which advised Catapult on the deal, said private equity interest in the contracting market remains high but that buyers are becoming more selective.
Private equity firms “that don’t have a track record ... in this industry — they’re going to have a harder time getting their ... investors excited about things because of the uncertainty,” DeSanto said.
Jason F. Rigoli, a managing director at private investment firm Monument Capital Group, which focuses on the security and defense sectors, said firms such as D.C. Capital and his own are still pursuing contracting companies.
But because some firms have lost interest and many of the larger contractors have been divesting more than acquiring, potential purchases now have lower and more reasonable prices, Rigoli said.
“Those guys that don’t have any real understanding of the space have pretty much backed out,” he said.