June 2014 Market Update

805 King Farm Boulevard, Suite 300 | Rockville, Maryland 20850 | P 301.231.6200 | F 301.231.7630 | aronsoncapitalpartners.com

June 2014 Market Update: Defense Technology & Government Services

Investment Banking

Larry A. Davis Partner

(301) 231-6225

[email protected]

Philip J. McMann Partner

(301) 231-6202

[email protected]

Tim P. Schmitt Vice President (301) 222-8285

[email protected]

http://www.aronsonllc.com/

Valuation from a Public Strategic Buyer


Introduction

At the end of June, two acquisitions of mid-size intelligence companies were announced by Tier 1 strategic buyers. On the 27th

,

Boeing announced that it had completed the acquisition of Ventura Solutions, a hardware and software engineering firm with a

focus on open source community support. Later that week, Lockheed Martin announced the acquisition of Zeta Associates, a

leader in the intelligence collection and processing. Although the timeline of these two transactions was coincidental, they

demonstrate an interesting trend in the industry: Tier 1 strategic buyers are once again pursuing access to innovative and

propriety technology solutions that they expect to leverage across a broader portfolio of existing Intelligence Community and

Department of Defense customers.

Boeing Acquires Ventura Solutions

Ventura Solutions, based in Annapolis Junction, Maryland, is a hardware and

software engineering company leading the development of the REDHAWK

framework and applications. REDHAWK is a software-defined radio (“SDR”)

framework designed to support the development, deployment, and management of

real-time software radio applications. Philip McMann of Aronson Capital, who

advised Ventura in the sale, said, “The level of interest we generated from the largest strategic buyers was a reflection of

Ventura Solutions’ unique mission-centric engineering solutions and strategic prime contracts for government customers.”

Given the differentiated set of highly-technical services and access to valuable agency customers, Ventura was a prime target

for Boeing to expand their cyber and intelligence program.

Lockheed Martin Acquires Zeta Associates

Within a few days the country’s two largest defense contractors had made critical

acquisitions in the intelligence processing and collection community. Zeta’s services

include software, communications and ground systems innovation. The Company

specializes in technology critical to national security missions. After announcing the

acquisition, Lockheed Martin Chairman, President and CEO, Marillyn Hewson,

said, “Zeta Associates’ expertise in cross-platform information collection, analysis and dissemination is an ideal complement to

our national security capabilities.” From the perspective of Zeta, Lockheed provides a greater set of resources and a broader

market base to properly leverage their unique and valuable skillset.

Public Strategic Buyer Value Drivers

During last month’s newsletter, we reviewed the

M&A process from the perspective of a buyer.

The major focus was on three core drivers:

1. Growth: The ability for the target to grow cash

flows above historical levels

2. Leveragability: The ability for the buyer to utilize company characteristics to generate additional synergistic cash flows.

3. Relative Risk: The likelihood that the target maintains existing cash flows and can achieve future projections.

Although these same values still apply, certain strategies and business characteristics provide more value to large, prime

acquirers.

Growth

In order to maintain and add new federal contracts to their portfolios, large strategic

buyers will focus on developing new capabilities and innovative solutions that create a

technical advantage over competitors. The most effective way to maintain essential

relationships with government customers is to structure a growth strategy around

distinct, critical markets, including cyber security, intelligence, C4ISR and healthcare.

Tier 1 strategic buyers are rapidly seeking similar acquisitions to expand the niche skill

sets and leadership roles within these rapidly growing markets.

Growth • Market Presence • Capabilities Focus • Track Record / Reputation • Near-Term Pipeline

Acquirer

Target

Acquirer

Target


Valuation from a Public Strategic Buyer


Leveragability • Intellectual Property

• Customer Relationships

• Key Contract Vehicles

• Technical Expertise

Relative Risk • Contract Profile

• Management Quality

• Margin Sustainability

• Existing Backlog

After the acquisition by Lockheed Martin, Zeta President and CEO, John Nelson lauded the opportunities presented to their

team, “By joining Lockheed Martin we’ll gain access to an unmatched portfolio of technology and expertise that will help us

better address a broader array of our customers’ critical missions.”

Leveragability

Strategic buyers seek companies that possess domain expertise in areas that the buyer can

leverage across a broader set of customers. Most small businesses lack the resources or

commitment to expand outside of their primary customer due to the investment and

geographical barriers that may exist. Tier 1 strategic buyers often identify opportunities to

market a target’s intellectual property or technical domain expertise across a broader

customer set.

A buyer may also pursue a particular company due to its unique relationship with a

government agency. Especially in the defense industry, a seller’s involvement with critical

and technologically-intensive operations can prove to be one of the most valuable aspects of an acquisition.

In the government contracting market, buyers value sellers with exclusive relationships on projects in cyber security,

intelligence, C4ISR and healthcare. The most valuable sellers will be vital service providers for, both operational and software,

platforms that agencies have built strategy around.

Relative Risk

From the buyer’s perspective, the perceived risk of the transaction can constrain valuation

since acquirers have to consider the “worst case” scenario in any analysis. Existing

backlog derived from prime, full and open contracts helps mitigate this risk, and the near

term revenue visibility is more certain. The existence of a strong management team that is

committed to staying with the business after a change of control can further reduce the

acquirer’s risk profile for the acquisition.

Other Price Drivers for Tier 1 Strategic Buyers

Revenue

Visibility

• Cash flow growth is the basis for acquisition valuation

• Current and accurate reporting provides the foundation for forecasting and

can facilitate the due diligence process

• A contract waterfall is a useful tool to track customer profitability and plan

for recompetes

A seller’s strong revenue prospects reduce

perceived customer risk. Certainty provides

value to an acquirer which drives purchase

price.

Contract

Mix

• Minimize reliance on a single contract, pursue schedules, GWAC’s and

BPA’s to broaden customer base

• Establish relationships that can help win prime awards

• Recruit key talent and acquire qualifications that will position business to

win full & open contracts

Strong sellers will have diversified services

that serve a wide-range of critical industry

operations, creating a pool of strong

customers that can support revenue visibility

• Patents, proprietary methods and innovative solutions are the strongest

value drivers for large, prime buyers

• Strategic buyers pursue firms that can create barriers to entry in mission

critical projects

• Develop innovative technologies that have clear scalability

Intellectual

Property

Being a leader in innovative technologies and

creating proprietary techniques create buyer

value on a scalable level

Strategic

Positioning

• Deliver technology-driven solutions to the customer

• Solve difficult problems in mission critical settings

• Focus on highly technical and avoid commodity-type staffing to resist

budget cuts

• Large primes pursue companies that have scalable, niche solutions

Often strategic buyers will pursue companies

as a part of an overall strategy. A seller

should position their company to be a leader

in niche industries that large buyers find

lucrative.

Other Key

Value Drivers

• A strong management that is committed to driving future value can help

reduce an acquirer’s perceived risk

• S Corporations and LLC’s provide significant tax advantages to acquirers

if the transaction is structured appropriately

Large acquirers often offer management

teams access to new lines of work and

greater career progression and can allow the

team to focus more on growth rather than

back office operations

Influence


Selected M&A Transactions


Preferred Systems Solutions, Inc. acquires Envision Technical Services, Inc.

On June 11, 2014, Preferred Systems Solutions, Inc. (PSS), a portfolio company of CM Equity Partners, L.P.

acquired privately held Envision Technical Services, Inc. (ETS). ETS, a Vienna, Va.-based IT company,

specializes in the support of mission-critical systems and applications and primarily serves an intelligence and

defense customer base.

In its announcement of the acquisition, PSS President and CEO Scott Goss commented: "The acquisition of

ETS brings a 22-year track record of outstanding customer support within the Intelligence and Defense

communities, and expands our commitment to the men and women upholding our national security.” Joe

Rexrode, current President and CEP of ETS, expressed his optimism stating: “We are excited to be joining the

PSS team. The combination will broaden our offerings to our customers and allow us to pursue new

opportunities on a larger scale.” Rexrode will now serve as Senior Vice President of PSS.

Terms of the deal were not disclosed.

Exelis, Inc. acquires Celestech, Inc.

On June 12, 2014, Exelis, Inc. (NYSE: XLS) announced its acquisition of privately held Celestech, Inc.

Chantilly, Va.-based Celestech, Inc. is a technology development and engineering firm with additional

influence and location in Phoenix, Ariz. The company, serving both the public and private sectors, specializes

in advanced signal processing and communication systems including next generation satellite and terrestrial

wireless solutions.

As part of the acquisition, Celestech will become part of the Electronic Systems division of Exelis supporting

data analytics and Exelis’ intelligence, surveillance, reconnaissance and analytics strategic growth platform.

Rich Sorelle, Exelis Corporate Vice President and President of Exelis Electronic Systems division, said of the

acquisition: "Leveraging Celestech's capabilities will help us respond to our customers' increasing needs for

greater data throughput and adaptability while strengthening our strategic growth platforms." In addition, the

acquisition is said to strategically bolster Exelis’ C4ISR capabilities. Tell Gates, Chief Executive Officer of

Celestech, Inc. added his support saying: "Our acquisition by Exelis significantly expands our engineering

team's ability to deliver advanced technology solutions that improve our Nation's ability to rapidly detect,

classify, and deliver actionable intelligence to forces across their theaters of operation. Celestech's team is

looking forward to continuing our research and development successes as a part of the Exelis team."

Terms of the deal were not disclosed.

Versar acquires JM Waller Associates

On July 1st, 2014, Versar acquired JM Waller Associates, a provider of environmental, facilities, professional

staffing and logistics consulting services. JM Waller’s clients include the US Army Corps of Engineers, US

Air Force, US Navy, Environmental Protection Agency and the General Services Administration. Tony Otten,

the CEO of Versar, said "The acquisition of J.M. Waller is a great strategic fit for Versar, and will

immediately strengthen not only our environmental services and professional services businesses, but also our

engineering and construction management services. Our cultures are similar and J.M. Waller's technical

capabilities strongly complement those of Versar. In particular, the addition of J.M. Waller's facilities

expertise and customer base will allow us to expand our reach in terms of clients, technical capabilities and

geography.”

Versar will pay $13 million using cash and a seller note. JM Waller is expected to be accretive to earnings

and comes with a backlog of over $25 million along with revenues of over $30 million.

Acquirer

Target

Acquirer

Target

Acquirer

Target


Government Services Industry Performance


Last 12-Month Returns

Last 12-Month Enterprise Value / EBITDA

Source: CapIQ Mid-Tier Index: BAH, LDOS, XLS, CACI, MANT, EGL, ICFI, KEYW, VSEC, NCIT Tier-1 Index: BA, LMT, GD, RTN, NOC, LLL

80

100

120

140

160

Jul-13 Oct-13 Feb-14 Jun-14

Ind

exe

d P

erf

orm

ance

LTM 6/30/2014 Returns

S&P: 21.4%

Mid-Tier: 21.6%

Tier-1: 33.9%

4.0x

5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

Jul-13 Oct-13 Feb-14 Jun-14

Ente

rpri

se V

alu

e/L

TM E

BIT

DA

6/30/2014 EV/LTM EBITDA

Mid-Tier: 8.8x

Tier-1: 9.1x


Public Company Comparables


USD in Mi l l ions , exc luding share prices

Price Annual % of Equ i ty En terprise LTM LTM

Company 06/30/14 High Low High Value Value Rev. EBITDA Rev. EBITDA Rev. EBITDA CY13A CY14P CY13A CY14P

Mid-Tier Federal Service Providers

Booz Allen Hamilton 21.24$ 25.32$ 16.61$ 83.9% 3,099$ 4,498$ 5,479$ 533$ 0.8x 8.4x 0.9x 8.6x 10.0% 9.5% (2.2%) (6.3%)

Leidos Holdings, Inc. 38.34 64.36 34.00 59.6% 2,867 4,017 5,495 352 0.7x 11.4x 0.8x 9.2x 6.3% 8.7% (10.8%) (12.1%)

Exelis Inc. 16.98 21.44 13.55 79.2% 3,219 3,588 4,676 640 0.8x 5.6x 0.8x 6.1x 13.9% 13.1% (12.8%) (5.8%)

CACI International Inc. 70.21 80.77 60.52 86.9% 1,650 2,922 3,572 331 0.8x 8.8x 0.8x 9.0x 9.2% 9.1% (4.3%) (1.6%)

SAIC 44.16 45.70 29.40 96.6% 2,119 2,385 3,959 247 0.6x 9.7x 0.6x 9.2x 6.2% 6.7% (13.8%) (6.1%)

Engility Holdings, Inc. 38.26 46.25 27.87 82.7% 672 1,052 1,385 120 0.8x 8.8x 0.7x 8.0x 9.1% 8.2% (15.0%) 4.6%

ManTech International Corporation 29.52 31.32 25.53 94.3% 1,099 1,023 2,116 154 0.5x 6.6x 0.5x 7.5x 7.4% 6.7% (10.5%) (15.6%)

ICF International Inc. 35.36 44.34 30.53 79.7% 705 812 960 87 0.8x 9.3x 0.8x 7.6x 9.0% 9.7% 1.3% 9.8%

The KEYW Holding Corporation 12.57 23.09 9.71 54.4% 470 556 285 16 2.0x 33.8x 1.8x 17.2x 7.0% 8.2% 22.7% 0.1%

VSE Corp. 70.32 70.35 39.98 100.0% 377 479 472 65 1.0x 7.3x 1.1x 7.3x 13.6% 14.7% (13.7%) (3.0%)

NCI, Inc. 8.88 13.12 4.10 67.7% 115 115 330 18 0.3x 6.4x 0.4x 6.7x 5.9% 5.6% (9.8%) (5.5%)

Mean 0.8x 10.6x 0.8x 8.8x 8.9% 9.1% (6.3%) (3.8%)

Median 0.8x 8.8x 0.8x 8.0x 9.0% 8.7% (10.5%) (5.5%)

Tier 1 Prime Contractors

The Boeing Company 127.23$ 144.57$ 98.99$ 88.0% 92,779$ 89,649$ 88,195$ 8,213$ 1.0x 10.9x 1.0x 9.4x 9.4% 10.3% 6.0% 3.8%

Lockheed Martin Corporation 160.73 168.87 105.54 95.2% 50,723 53,611 44,938 5,951 1.2x 9.0x 1.2x 8.4x 11.8% 14.4% (3.9%) (1.3%)

General Dynamics Corp. 116.55 121.68 77.40 95.8% 39,960 39,575 31,138 4,284 1.3x 9.2x 1.3x 9.2x 13.6% 14.0% (0.9%) (2.7%)

Raytheon Co. 92.25 102.33 64.48 90.1% 28,861 29,230 23,335 3,415 1.3x 8.6x 1.3x 7.7x 14.1% 16.1% (2.9%) (4.0%)

Northrop Grumman Corporation 119.63 126.00 81.74 94.9% 25,617 27,661 24,405 3,703 1.1x 7.5x 1.2x 6.9x 14.7% 15.4% (2.2%) (4.0%)

L-3 Communications Holdings Inc. 120.75 127.27 84.50 94.9% 10,413 13,904 12,415 1,498 1.1x 9.3x 1.2x 9.3x 11.9% 12.3% (3.9%) (4.4%)

Mean 1.2x 9.1x 1.2x 8.5x 12.6% 13.8% (1.3%) (2.1%)

Median 1.2x 9.1x 1.2x 8.8x 12.7% 14.2% (2.6%) (3.4%)

Defense System / Electronics F irms

Rockwell Collins Inc. 78.14$ 84.06$ 62.44$ 93.0% 10,588$ 12,707$ 4,760$ 1,088$ 2.7x 11.7x 2.4x 10.2x 22.5% 23.1% (1.6%) 12.7%

Harris Corporation 75.75 79.32 48.75 95.5% 8,067 9,376 5,042 1,105 1.9x 8.5x 1.9x 8.5x 21.8% 21.8% (7.0%) 0.7%

Teledyne Technologies Inc. 97.17 102.40 76.26 94.9% 3,646 4,178 2,343 338 1.8x 12.4x 1.7x 10.7x 14.2% 15.9% 9.9% 3.8%

Cubic Corporation 44.51 56.92 43.75 78.2% 1,192 1,200 1,340 98 0.9x 12.3x 0.8x 8.3x 8.8% 9.4% (3.4%) 8.0%

Kratos Defense & Security Solutions, Inc. 7.80 9.18 6.32 85.0% 448 1,036 898 67 1.2x 15.5x 1.1x 9.7x 8.3% 10.4% (1.9%) (1.2%)

Mercury Systems, Inc. 11.34 14.40 8.42 78.8% 377 331 218 8 1.5x 43.4x 1.4x 9.3x 2.4% 14.1% (4.6%) 4.6%

Mean 1.6x 17.3x 1.6x 9.5x 13.0% 15.8% (1.4%) 4.8%

Median 1.7x 12.3x 1.6x 9.5x 11.5% 15.0% (2.7%) 4.2%

Foreign Contractors

Airbus Group N.V. 67.00$ 78.49$ 54.61$ 85.4% 52,498$ 50,265$ 82,411$ 6,349$ 0.6x 7.9x 0.6x 6.1x 7.0% 9.6% 9.6% 0.6%

BAE Systems plc 7.40 8.06 6.40 91.9% 23,395 24,681 27,937 3,300 0.9x 7.5x 0.8x 6.8x 11.2% 12.7% 3.0% 4.1%

Finmeccanica SpA 9.51 10.13 4.93 93.9% 5,497 13,180 22,050 1,181 0.6x 11.2x 0.7x 6.0x 5.6% 11.2% 0.9% (14.5%)

Thales SA 60.48 68.45 48.02 88.3% 12,358 10,810 19,547 1,914 0.6x 5.6x 0.6x 5.3x 9.7% 11.1% 4.7% (5.1%)

Cobham plc 5.34 5.63 4.34 94.9% 6,030 6,812 2,965 742 2.3x 9.2x 2.2x 10.3x 24.8% 21.9% 4.3% 3.6%

Serco Group plc 6.25 11.79 5.36 53.0% 3,359 4,646 7,104 516 0.7x 9.0x 0.6x 11.4x 6.2% 5.1% 7.6% 10.2%

Ultra Electronics Holdings plc 31.90 34.26 28.09 93.1% 2,220 2,288 1,234 221 1.9x 10.4x 1.7x 9.9x 17.7% 17.5% (0.2%) 7.3%

QinetiQ Group Plc 3.54 4.08 3.07 86.6% 2,286 1,999 1,986 262 1.0x 7.6x 1.4x 9.0x 15.4% 14.9% (9.6%) (21.8%)

Mean 1.1x 8.5x 1.1x 8.1x 12.2% 13.0% 2.5% (2.0%)

Median 0.8x 8.5x 0.8x 7.9x 10.4% 11.9% 3.6% 2.1%

Commercial IT F irms

IBM 181.27$ 200.94$ 172.19$ 90.2% 183,478$ 217,899$ 98,827$ 25,146$ 2.2x 8.7x 2.2x 7.7x 25.1% 27.5% (4.6%) (2.3%)

Accenture plc 80.84 85.88 69.78 94.1% 51,030 47,546 29,312 4,529 1.6x 10.5x 1.5x 9.3x 15.4% 16.4% 2.5% 5.6%

Xerox Corporation 12.44 13.01 9.07 95.6% 14,457 21,360 21,354 2,692 1.0x 7.9x 1.0x 6.4x 11.5% 14.6% (1.4%) (0.9%)

Computer Sciences Corporation 63.20 64.72 43.99 97.7% 9,201 9,675 12,998 1,969 0.7x 4.9x 0.7x 4.4x 14.5% 16.8% (3.8%) (7.5%)

Navigant Consulting Inc. 17.45 19.78 12.00 88.2% 858 976 726 117 1.3x 8.3x 1.1x 7.7x 16.8% 13.6% 1.7% 20.0%

Unisys Corporation 24.74 36.05 21.97 68.6% 1,264 903 3,408 245 0.3x 3.7x 0.3x 2.2x 7.7% 10.2% (6.7%) (0.5%)

Kforce Inc. 21.65 23.80 14.69 91.0% 730 791 1,192 58 0.7x 13.5x 0.6x 9.7x 4.6% 6.1% 6.4% 12.6%

Black Box Corporation 23.44 31.59 19.34 74.2% 364 496 972 68 0.5x 7.3x 0.5x 7.5x 7.9% 6.4% (4.4%) 1.3%

Source: Capital IQ Mean 1.0x 8.1x 1.0x 6.9x 12.9% 14.0% (1.3%) 3.5%

EV: Enterprise Value Median 0.9x 8.1x 0.9x 7.6x 13.0% 14.1% (2.6%) 0.4%

LTM: Trailing Twelve Months

NTM: Next Twelve Months

EV as a Mu lt iple of

LTM NTM EBITDA Margin Revenue Growth


Recent M&A Transactions (Last 12 Months)


Close

Date Name Industry Buyer Buyer Class i f icat ion $M /LTM Rev

/LTM

EBITDA

Pending Zeta Associates Cyber / Intel Lockheed Martin Corporation Public Strategic N/A N/A N/A

Pending Micros Systems IT Services Oracle Public Strategic 5,300.0 N/A N/A

07/01/14 JM Waller Associates C4ISR Versar Public Strategic 13.0 N/A N/A

07/01/14 Verizon Communications (Federal Network Systems) IT Services Jacobs Engineering Public Strategic N/A N/A N/A

06/27/14 Ventura Solutions Cyber / Intel Boeing Public Strategic N/A N/A N/A

06/12/14 Celestech C4ISR Exelis Public Strategic N/A N/A N/A

06/11/14 Envision Technical Services IT Services Preferred Systems Solutions (PSS) (CM Equity) P/E Backed Strategic N/A N/A N/A

06/02/14 National Security Partners Cyber / Intel Noblis Private Strategic N/A N/A N/A

05/29/14 Astrotech Space Operations Other Lockheed Martin Corporation Public Strategic N/A N/A N/A

05/27/14 7Delta IT Services ManTech Public Strategic N/A N/A N/A

05/12/14 RNSolutions Healthcare IT Dovel Technologies Private Strategic N/A N/A N/A

05/09/14 nPulse Technologies IT Services FireEye Public Strategic N/A N/A N/A

04/22/14 QinetiQ North America (Services and Solutions Group) IT Services The SI Organization (Veritas Capital) P/E Backed Strategic 215.0 N/A N/A

04/21/14 Secure Mission Solutions (RLH Equity Partners) Cyber / Intel Parsons Public Strategic N/A N/A N/A

04/02/14 LGS Innovations, LLC (Portfolio company of Alcatel-Lucent) Cyber / Intel Madison Dearborn Partners / CoVant P/E Sponsor 200.0 N/A N/A

04/02/13 Viecore FSD Cloud / Data Analytics EOIR Technologies, Inc. P/E Backed Strategic N/A N/A N/A

03/31/14 Avaya Government Solutions Inc. (IT Professional Services IT Services Camber Corporation (New Mountain Capital, LLC) P/E Backed Strategic 100.0 N/A N/A

03/14/14 Industrial Defender, Inc. Cyber / Intel Lockheed Martin Corporation Public Strategic N/A N/A N/A

03/10/14 SecureForce, LLC Cyber / Intel BRTRC Federal Solutions Private Strategic N/A N/A N/A

03/05/14 Data Tactics Corporation Cloud / Data Analytics L-3 Communications Holdings Inc. Public Strategic N/A N/A N/A

03/03/14 Intific, Inc. IT Services Cubic Corp. Public Strategic N/A N/A N/A

02/28/14 Forgentum, Inc. Healthcare IT Fulcrum IT Services, LLC (Grindstone Partners, LLC) P/E Backed Strategic N/A N/A N/A

02/28/14 EADS North America Test and Services Division (Airbus Group, IT Services Astronics Corp. Public Strategic 53.0 0.75 x N/A

02/19/14 A&N Associates, Inc. Other Tangible Security, Inc. Private Strategic N/A N/A N/A

02/19/14 Allied Technology Group, Inc. IT Services ManTech International Corp. Public Strategic 45.0 N/A N/A

02/18/14 3 Phoenix, Inc. C4ISR Ultra Electronics Holding plc Public Strategic 87.0 N/A N/A

02/18/14 Anaren, Inc. Technical Services Veritas Capital P/E Sponsor 302.7 1.9 x 11.0 x

02/10/14 Business Computer Applications, Inc. Healthcare IT Acentia, LLC (Snow Phipps Group) P/E Backed Strategic N/A N/A N/A

01/31/14 Dynamics Research Corp. IT Services Engility Holdings, Inc. Public Strategic 202.0 0.7 x 8.2 x

01/30/14 ServiceMesh Inc. Cloud / Data Analytics Computer Sciences Corporation Public Strategic 295.0 N/A N/A

01/27/14 Commonwealth Technology, Inc. Cyber / Intel MacAuley-Brown, Inc. Private Strategic N/A N/A N/A

01/13/14 Entrust, Inc. (Portfolio company of Thoma Bravo, LLC) Cyber / Intel Datacard Group Private Strategic N/A N/A N/A

01/07/14 Tactical Micro, Inc. (Relativity Capital, LLC) Technical Services Secure Communication Systems, Inc. (Vance Street Capital LLC) P/E Backed Strategic N/A N/A N/A

01/02/14 Twisted Pair Solutions, Inc. C4ISR Motorola Solutions, Inc. Public Strategic N/A N/A N/A

12/30/13 ARINC Inc. IT Services Rockwell Collins, Inc. Public Strategic 1,390.0 2.3 x 12.9 x

12/18/13 PCO Innovation IT Services Accenture Ltd. Public Strategic N/A N/A N/A

12/11/13 Globecomm Systems, Inc. C4ISR Wasserstein & Co. P/E Sponsor 277.0 0.8 x 8.5 x

12/09/13 Animal Model Services Business of Advanced BioScience Other BIOQUAL, Inc. Public Strategic N/A N/A N/A

12/06/13 OPINICUS Corp. IT Services Textron, Inc. Public Strategic N/A N/A N/A

12/06/13 Kimmich Software Systems, Inc. Cloud / Data Analytics Vistronix, LLC (Enlightenment Capital) P/E Backed Strategic N/A N/A N/A

12/05/13 Netcentric Technology, Inc. C4ISR Vistronix, LLC (Enlightenment Capital) P/E Backed Strategic N/A N/A N/A

11/26/13 Serco Group plc (Transport Solutions business) Technical Services Cubic Corp. Public Strategic 70.0 1.0 x 5.5 x

11/22/13 National Technical Systems, Inc. Technical Services Aurora Capital Group P/E Sponsor 307.0 1.7 x 13.5 x

11/15/13 Six3 Systems Inc. Cyber / Intel CACI International Inc. Public Strategic 820.0 1.9 x 13.4 x

11/13/13 Centurion Research Solutions, LLC Other Deltek, Inc. Private Strategic N/A N/A N/A

11/13/13 GreenLine Systems IT Services A-T Solutions, Inc. (CI Capital Partners, LLC) P/E Backed Strategic N/A N/A N/A

11/12/13 Information Systems Consulting Group, Inc. IT Services Acentia, LLC (Snow Phipps Group) P/E Backed Strategic N/A N/A N/A

11/08/13 GAP Solutions, Inc. Technical Services Tallasi Technology (Bluestone Investment Partners) P/E Backed Strategic N/A N/A N/A

Target Information Buyer Information EV Information


Recent M&A Transactions (Last 12 Months)


Public

Strategic

40%

Private

Strategic

23%

P/E Backed

Strategic

24%

P/E

Sponsor

8%

Buyer

Classification

Close

Date Name Industry Buyer Buyer Class i f icat ion $M /LTM Rev

/LTM

EBITDA

11/07/13 HighCloud Security Cloud / Data Analytics HyTrust, Inc. Private Strategic N/A N/A N/A

11/01/13 Pacific Defense Solutions, LLC Technical Services Integrity Applications, Inc. Private Strategic N/A N/A N/A

11/01/13 Professional Consulting Solutions, Inc. Other Apprio, Inc. Private Strategic N/A N/A N/A

10/28/13 W&D Holdings Ltd, Parent Company of Wood & Douglas Ltd Technical Services Ultra Electronics Holdings Public Strategic N/A N/A N/A

10/22/13 Symmetricom, Inc. Other Microsemi, Corp. Public Strategic N/A N/A N/A

10/11/13 Michael Baker Corp. Technical Services Integrated Mission Solutions (DC Capital Partners) P/E Backed Strategic 312.0 0.5 x 9.5 x

10/10/13 Acroamatics, Inc. Other Delta Information Systems, Inc. Private Strategic N/A N/A N/A

10/07/13 Sourcefire, Inc. Cyber / Intel Cisco Systems, Inc. Public Strategic 2,700.0 7.5 x 37.6 x

10/01/13 Strong Point Research IT Services Technical and Project Engineering, LLC (TAPE) Private Strategic N/A N/A N/A

09/27/13 N2 Net Security, Inc. Cyber / Intel Tangible Software, Inc. Private Strategic N/A N/A N/A

09/18/13 ASM Research, Inc. Healthcare IT Accenture Ltd. Public Strategic N/A N/A N/A

09/16/13 AMCAD Cadastre, LLC IT Services Riverside Partners LLC P/E Sponsor N/A N/A N/A

09/11/13 Amor Group IT Services Lockheed Martin Corporation Public Strategic N/A N/A N/A

09/03/13 Geo-Marine, Inc. Technical Services Versar, Inc. Public Strategic N/A N/A N/A

07/29/13 Wyle Laboratories (Telemetry and Data Systems business) Other Smartronix, Inc. Private Strategic N/A N/A N/A

07/16/13 Enigma, Inc. IT Services Parametric Technology Corp. Public Strategic N/A N/A N/A

07/08/13 National Hybrid, Inc. (from API Technologies Corp.) Cloud / Data Analytics Data Device Corp. P/E Backed Strategic N/A N/A N/A

07/02/13 Advanced Interactive Systems, Inc. Assets Technical Services Cubic Corp. Public Strategic N/A N/A N/A

07/02/13 SM&A, Inc. Other Caltius Partners P/E Sponsor N/A N/A N/A

07/01/13 PeakPoint Technologies, Inc. Cloud / Data Analytics Oasis Systems LLC P/E Backed Strategic N/A N/A N/A

Target Information Buyer Information EV Information

Cyber / Intel

17%

Cloud / Data

Analytics

14%

IT Services

27% Health-

care IT

6%

Technical

Services

16%

C4ISR

7%

Other

12%

Target Industry


Representative ACP Transactions


WHO IS ARONSON CAPITAL PARTNERS?

Aronson Capital Partners is a leading financial advisor to government services and technology firms. We exercise our special

domain expertise in the Defense, Intelligence, and Federal Civilian markets to achieve exceptional results for our clients. In

addition to completing more than 100 transactions in the federal sector, our principals have decades of executive level, hands-on

experience in the industry – a key differentiator that leads to success.

Mergers & Acquisitions

• Sell-Side M&A

• Buy-Side M&A

• Private Equity Platform Acquisitions

• Management & Leveraged Buyouts

• Divestitures

• ESOPs

• Asset Sales

Corporate Finance

• Recapitalizations & Restructurings

• Common & Preferred Equity

• Senior Debt

• Subordinated Debt

• Convertible Debt

• Private Equity Investments

• Minority Equity Investments

Financial Advisory

• Internal Capital Transaction Advisory

• Independent Corporate Valuations

• Fairness Opinions

• Strategic Alternatives Assessments


Documents

June 2014 Market Update