News & Events

Increasing Agility, Increasing M&A Interest


As the Federal Government attempts to modernize its enterprise information technology (“IT”) systems, many agencies are focusing on increasing their agility in procurement and contracting processes by utilizing agile development. While still in its early stages, the Federal adoption of agile has been kick-started in recent years in response to private security successes in utilizing agile practices.  Agency IT strategies, such as the Department of Defense’s (“DoD”) 30 Year Strategic Plan, the Department of Homeland Security’s (“DHS”) Digital Strategy, and the President’s $86 billion FY 2016 IT budget, stressed the importance of utilizing agile in order to increase flexibility, better meet constituent needs, and overcome organizational challenges.  Agencies have responded to these stratagems by basing more agency projects on agile development.  For example, the U.S. Air Force awarded 22 companies $490 million in agile contracts in August, the USDA has had 10-12 active agile development projects over the past nine months, and the DHS has strongly hinted at expanding its adoption of agile at U.S. Citizen and Immigration Services (“CIS”) and U.S. Customs and Border Protection (“CBP”) agency-wide.  These developments reflect an ever growing momentum towards the wide-scale adoption of agile development practices within the Federal Government.  As such, there are significant opportunities for mid-size firms with agile capabilities.

The Federal emphasis on agile development positions companies with agile capabilities (including scrum masters, agile project management expertise, and the ability to produce concrete agile deliverables during the development process) to capitalize on this market opportunity, drive growth, and attract continued M&A interest. This interest in agile is evidenced by several recent transactions involving the acquisition or enhancement of agile capabilities as an important or driving rationale for the transaction.  Such transactions include the acquisition of RN Solutions by Dovel Technologies in May 2014, Veritas Capital’s acquisition of Alion Science & Technology in August 2015, and the merger of Salient and CRGT in September 2015.  In these transactions, the addition of agile capabilities was a central aspect of acquirers’ strategies to protect existing programs, grow current contract positions, and move into new Federal markets. Specifically, agile software development and niche engineering techniques were cited as important factors in these acquisitions, which were meant to expand the “technical competencies” and “technology thought leadership” in serving Federal customers (Dovel Press Release, May 12, 2014).  As this trend persists, agile will continue to serve as a dynamic driver of M&A activity, and companies with expertise in agile processes will be prime targets.