August Cyber Intelligence Review

Several noteworthy acquisitions and VC investments took place in the Cyber / Intelligence arena during July, as the areas of Cloud and Big Data continue to generate significant interest among both strategic and financial investors.

Additionally, cybersecurity remained at the forefront of national awareness as the Industrial Control Systems Cyber Emergency Response Team (ICS-CERT) announced a significant jump in the number of critical infrastructure breaches that took place in 2011.

VMware made a splash this past month, spending over $1 billion on two acquisitions to reinforce its position as a leader in virtualization and cloud infrastructure solutions.  It made a particularly strong statement with its acquisition of 100 person startup Nicira for $1.2 billion.

On the funding side, Trinity Ventures and Kleiner Perkins Caufield & Byers were active in the month of July, both participating in three separate rounds of funding for three different companies.  Additionally, Palo Alto Networks and Kayak Software posted substantial returns during their initial public offerings on July 17th, both closing with gains of more than 25%. This high level of funding activity aligns with the recent theme of increased investment in the cyber arena by venture capital funds.

Click here to review the Cyber / Intelligence monthly post.

June Cyber Intelligence Review

May was another busy month in the Cyber / Intel arena, with a significant increase in venture capital activity and news regarding the ever-increasingly precarious cyber threat environment grabbing headlines.  Researchers in the UK found embedded hardware “backdoor” vulnerabilities in chips commonly used in defense applications and news of more large-scale data losses surfaced. 

Offensive cyber activity was also in the news as The New York Times reported that U.S. officials confirmed responsibility (with the close participation of Israel) for the Stuxnet virus, aimed at disabling Iran’s uranium enrichment activities.  Additionally, May saw the discovery of a successor to Stuxnet, known as “Flame,” which has recently infected systems across the Middle East and appears to be intended for gathering intelligence data.

Several companies focused on Big Data solutions raised venture capital funding in May, while two other Big Data firms were acquired by larger industry players to augment existing offerings.  Accel Partners and Sequoia Capital also invested $70 million in SaaS data collection and analysis provider Qualtrics, the two firms’ largest-ever joint investment.

Click here to review the Cyber / Intelligence monthly post.

May Cyber Intelligence Review

Over the past month, there has been significant activity in the Cyber / Intel space – particularly in the world of Big Data – with several policy developments and a handful of noteworthy transactions taking place.  The end of March included an announcement from the White House that six federal departments / agencies would be committing $200 million towards a new Big Data initiative, followed by April coming to a close with the House of Representatives passing three cyber-related bills. 

Big Data companies grabbed headlines for both M&A and venture capital fundraising in April, and Splunk, the first pure-play public Big Data company, saw its stock price double in the first day of trading after its IPO on April 19th.

Click here to review the Cyber / Intelligence monthly post.

March Cyber Intelligence Review

March was a busy month in the Cyber / Intel arena with some newsworthy market developments, and a handful of notable acquisitions and VC funding transactions taking place.

In the federal arena, General Keith Alexander, Director, NSA and Commander of CYBERCOM spoke to the House Committee on Armed Services Subcommittee on Emerging Threats and Capabilities.  General Alexander addressed key cyber threats and challenges facing our nation, as well as the country’s approach to offensive cyber operations.

On the M&A / VC funding front, security and cloud computing remain top priorities, with Dell’s acquisition of once-public SonicWall for over $1 billion, and AMD’s purchase of SeaMicro for $334 million leading the way.

Click here to review the Cyber / Intelligence monthly post.

 

2011 Government Services M&A: Year in Review

Looking back at 2011, the year resulted in a healthy level of government services activity.  During the year, 89 deals were announced.  Although the total deal activity fell 10% from the 99 deals announced in 2010, 2011 activity was well above 2009 levels of 77 deals.

Similar to 2010, hot areas in the M&A market continued to be cybersecurity, intelligence, ISR, and healthcare IT in 2011, but firms with mobility and cloud-oriented capabilities were also in high demand.  We saw buyers trying to align themselves with these strategic federal funding areas, amidst overall uncertainty in federal budgets.  Others buyers used acquisitions to gain access to certain high-priority customers, contract vehicles, and capabilities.

Strategic buyers announced the majority of the 2011 deals, representing 85% of the total.  The strategic buyers were mainly government services players, while defense and diversified strategic buyers dabbled in the market.  CACI, General Dynamics, KEYW, and Ultra Electronics were the most active buyers in 2011 with three transactions each, followed by nine other buyers with 2 transactions – CH2M Hill, ECS, Harris, IBM, ManTech, Raytheon, Salient Federal Solutions, Sotera Defense Solutions, and URS.

The activity shows that larger buyers with healthy balance sheets and plenty of cash, aren’t afraid to use it.  Two other trends worth noting were the influence of private equity who participated in ~35% of deals as the buyer or via an existing portfolio company, and increased willingness of larger players to acquire much smaller companies that are strategic in nature, but don’t immediately move the needle from a revenue basis.

Moving into 2012, there is significant momentum given the number of buyers that remain hungry for deals, but have very focused and disciplined M&A strategies as well.

Top 5 Largest 2011 Government Services Deals: (1)

Date (2)
Buyer Target
4/1/2011 Providence Equity Partners LLC SRA International, Inc.
8/16/2011 General Dynamics Corp. Vangent, Inc.
11/7/2011 HMS Holdings Corp. HealthDataInsights, Inc.
10/19/2011 The Parsons Corporation Cobham Analytic Solutions (formerly SPARTA)
3/3/2011 Ares Management LLC Global Defense Technology & Systems, Inc. (now known as  Sotera Defense Solutions, Inc.)

(1) Based on enterprise value and publicly available information

(2) Announcement date

Written by Marc Marlin and Laura Hockensmith.