Veritas Capital on Wednesday said it has agreed to acquire federal services provider Perspecta [PRSP], which will be combined with
Peraton to create a top-tier federal technology and services company.
The $7.1 billion deal for Perspecta, which is expected to close in the first half of 2021, comes a month after Veritas signed a $3.4 billion deal to acquire Northrop Grumman’s [NOC] government services business, which will also be combined with Peraton.
Veritas acquired the former Harris Corp.’s information technology (IT) business in July 2017 and renamed it Peraton. At the time, Peraton had about $1.1 billion in sales. Peraton doesn’t typically disclose its annual sales.
Peraton, through Veritas, in 2018 acquired Strategic Resources International, a firm with 40 employees that brought capabilities in mobile, very small aperture terminals and other communication systems. In 2019, again through Veritas, Peraton acquired Solers, a company with 400 employees that helped advance its capabilities in the space situational awareness, resiliency and protection market.
The acquisition of the Northrop Grumman businesses is also expected to close in the first half of 2021. The business has about 6,400 employees and was projected to have $2.3 billion in sales in 2020. Perspecta, which has nearly 14,000 employees, is forecasting anywhere between $3.7 billion and $4.6 billion in sales in its current fiscal year that ends in October.
The reason for the wide range in Perspecta’s forecast is because the company is working through a contract potentially worth $800 million to continue work on a portion of the Navy’s Next Generation Enterprise Network (NGEN). Perspecta lost a recompete of the NGEN program to Leidos [LDOS], which is transitioning into the program while Perspecta continues supporting the Navy until the handover is completed sometime later this year.
Government contractors in the federal services space always say that scale matters and the top companies have been acquiring and growing their way to billions of dollars in annual sales, giving them the heft to pursue large, complex programs and to continue buying up smaller competitors.
General Dynamics’ [GD] Technologies segment, which serves the government mission solutions and IT markets, posted $12.6 billion in sales in 2020. Leidos expects to post between $12.3 billion and $12.5 billion for 2020. Science Applications International Corp. [SAIC] is projecting just over $7 billion in sales in its current fiscal year and CACI International [CACI] is expecting to report over $6 billion in sales when it reports its fiscal year results this summer.
“Perspecta brings highly skilled talent and differentiated technology expertise across a broad range of customers in the government markets which will complement our offering and enhance our ability to drive innovation,” Stu Shea, chairman, president and CEO of Peraton, said in a statement. “Together, we will create a top-tier, privately-owned government technology business with a focus on missions of consequence.”
Perspecta’s customers include the federal defense, intelligence, civilian and healthcare markets and it also serves state and local clients. The company’s capabilities include systems engineering and integration, data analytics, cyber security, cloud and IT services, and software development.
Perspecta recently received two contracts from the Pentagon’s Defense Advanced Research Projects Agency for improving security to 5G networks.
At the end of its second quarter last Oct. 2, Perspecta’s total backlog stood at $13.9 billion, $1.8 billion of which was funded.
Veritas is already a significant shareholder in Perspecta, owning 14.5 percent of the company’s stock. Perspecta said its pending sale to Veritas follows a comprehensive review of its alternatives.
Peraton in December said the acquisition of the Northrop Grumman services businesses will complement its existing work and add adjacent customers and capabilities to federal civilian and health spaces, and expend capabilities in defensive cyber operations, agile and DevSecOps, cloud and mission critical IT.
In additional to regulatory approvals, Perspecta’s shareholders must agree to the sale. The company’s financial advisers on the deal are Goldman Sachs & Co. and Stone Key Partners.