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SAIC Earnings Announcement, Evidencing Government Services Market Trends for Both Operators and M&A


SAIC announced first quarter 2012 earnings last month that not only showcased the challenges of the current low-to-no growth macro spending environment and budget pressures, but also the growth opportunity and commensurate heightened M&A rationale for Intelligence, National Security, and healthcare IT assets.

The Company reported 2% revenue growth for the quarter year-over-year (“YoY”), and only 1% organic.  By segment, growth in cyber and intelligence revenue of approximately 7% YoY carried flat to declined performance across the rest of the contract portfolio.  The Health, Energy and Civil Solutions contracted 8%, however, declines in this segment were partially offset by stronger performance in health IT activities, with U.S. DoD military health system customers.

Especially in the current market environment, growth remains the key to unlocking value.  As evidenced by SAIC’s performance, market segments such as Intel / Cyber, C4ISR and HIT continue to offer the best opportunity to drive the top line.  M&A activity through the second quarter 2011 reflects the growth opportunities presented by the hot lane market segments as well.  There were 19 deals announced in 2Q2011, bringing the total for the year to 35.  58% and 60% of announced deals for the quarter and year, respectively, had targets with a strategic focus or meaningful presence in these aforementioned priority markets.  Looking forward, we expect the M&A environment to remain growth focused amongst buyers, and opportunity rich for those companies squarely positioned in these priority areas.

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