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SRA Poised to Become Acquisition Target

A fast-growing provider of information technology (IT) services to the Pentagon and Department of Homeland Security with a penchant for making strategic acquisitions may soon find itself up for grabs.

Industry analysts noted a recent statement by a key executive of SRA International Inc. marked a critical turning point in the company’s profile as a staunchly independent concern.

SRA Chairman Dr. Ernst Volgenau confirmed his company had hired an investment banking firm to provide financial advice “following a series of inquiries regarding the company’s willingness to consider offers.”

That succinct statement is considered important because for the past several years SRA has landed on the radar screens of major technology contractors looking to grow though acquisitions.

However, industry observers have noted all along that SRA hadn’t attracted serious buyers because it was assumed Volgenau had no interest in selling. His desire regarding SRA’s independence is crucial because, analysts noted, he still owns enough shares to block any potential sale.

Indeed, Volgenau founded SRA in 1978 and served as president and CEO until 2005. During that time, the company grew rapidly from one person to more than 6,400 and has been profitable every year.

In his official statement, Volgenau noted the “the retention of advisors does not reflect a decision that the company is or should be for sale.” But that comment occurred shortly after a London newspaper reported that Serco Group of Britain had pulled out of early-stage talks about acquiring SRA for around $2 billion.

SRA has in recent years become an increasingly more visible firm in the federal IT arena, particularly regarding the departments of Defense and Homeland Security. Much of that stems from its fast growth, which included three acquisitions in 2010.

Last November, SRA completed the purchase of Platinum Solutions, Inc., a privately held systems integrator and software developer. Platinum Solutions specializes in developing customized software applications and providing data management solutions for customers in the national security and civil government arenas.

In July, SRA acquired Sentech, an energy management consulting company. And in January SRA picked up Perrin Quarles Associates, Inc., a privately held environmental consulting firm.

Financial analysts who track the firm’s performance noted that SRA had a strong year in fiscal 2010. Annual revenue grew 8.2 percent to $1.67 billion.

SRA continued that strong performance into the first quarter of the current fiscal year. During the period ended Sept. 30, the company won contracts with potential value of $1.1 billion.

As a result, the company’s backlog of signed business orders grew 10 percent from the year-earlier period to $5.0 billion. The pipeline of funded contracts increased 29 percent to $1.1 billion.

Last May, SRA won a Global Battlestaff and Program Support contract from the United States Special Operations Command (USSOCOM) at MacDill Air Force Base worth an estimated $1.5 billion over five years if all options are exercised.

A month later, the company became one of six major IT players to land a portion of a Defense Intelligence Agency multi-award contract with a total value of $6.6 billion. Under the sprawling IT program, SRA will provide technology assessment and evaluation, systems engineering, operations support and information assurance.

Meanwhile, the company’s stock has been on a tear. That results from SRA’s strong operating results and also from a growing belief SRA itself may soon become an acquisition target.

Over the past year, SRA has returned nearly 56 percent to investors. The stock has been particularly active over the past month, rising some 30 percent in value as the average number of shares trading hands soared 160 percent to 1.7 million.

By

Michael A. Robinson has written articles for some of the nation's more prestigious publications. As...

    li class="comment even thread-even depth-1" id="comment-381">

    Wish I had that stock….

    li class="comment byuser comment-author-chuck-oldham odd alt thread-odd thread-alt depth-1" id="comment-382">
    Chuck Oldham (Editor)

    Wish I had stock…