David Scott, CEO of Xator, said, “Merlin International’s Professional Services Group significantly expands our Cyber Security and Network Operations portfolio by adding enhanced capabilities and increased capacity to deliver converged security solutions for our customers. This acquisition expands our client footprint into the health IT critical infrastructure arena. The PSG team shares Xator’s vision of being our customers’ trusted global partner. Consistent with Xator’s culture, PSG personnel are customer-focused and mission-driven, resulting in sustained exceptional results for our customers.”
Jones Tallent, CFO of Merlin, said, “The McLean Group team ran a very efficient and thorough process that enabled us to find the right strategic and cultural fit for the Professional Services Group’s leadership team and employees and customers, while generating maximum competition. The McLean Group served as a trusted advisor and provided senior level commitment at every step of the process.”
This transaction highlights several trends in the current government services M&A environment, including:
- The buyer universe continues to have a robust appetite for well-positioned businesses with differentiated capabilities and service offerings. Cyber Security remains a high-demand sector for acquisitions, however buyers are really drilling down to understand the true nature of potential acquisition targets’ cyber offerings. Many companies are described as having a cyber presence, but few offer deep technical expertise that can be leveraged by an acquirer.
- Large and mid-tier companies continue to shape their business portfolios by divesting non-core assets to focus on their core businesses. In addition to freeing management’s attention and corporate resources to focus on higher-growth segments, divestitures generate capital that can be reinvested to accelerate growth.
- There is a growing universe of middle market consolidators actively pursuing M&A opportunities in the government services and defense technology space. This transaction represents Xator’s fifth acquisition since 2014. Similarly, companies including Belcan, The Cadmus Group, ECS Federal, and Preferred Systems Solutions (PSS) have each made multiple recent acquisitions. As these middle market companies position themselves to pursue larger contracts and compete more cost-effectively against larger contractors, M&A increasingly will be utilized to build critical mass. This has resulted in an attractive M&A opportunity for well-positioned businesses that may not yet have achieved the scale necessary to garner the attention of larger contractors.
ABOUT THE MCLEAN GROUP
The McLean Group is a leading investment bank that provides objective strategic and financial advice on mergers and acquisitions, debt and equity recapitalizations, ESOPs, and business valuations. The M&A Group is organized around four verticals: Defense, Government & Intelligence, Critical Infrastructure, Physical & Cyber Security, and Maritime Transport & Facilities. The McLean Group applies comprehensive industry knowledge, extensive transactional expertise, a real-time understanding of industry-specific valuation drivers, and senior-level attention to every client engagement it undertakes.