In a move to bolster its place in the government information technology market, Northrop Grumman Corp. announced Wednesday that it had signed an agreement to acquire Federal Data Corp., a systems integrator and software solutions provider.
Federal Data, whose federal customers include the National Institutes of Health, NASA, the Federal Aviation Administration and others, will be folded into the operations of Logicon Inc., a Northrop Grumman company, said Herb Anderson, president and chief executive officer of Herndon, Va.-based Logicon.
"One of the major reasons we looked at [Federal Data] is that we do a lot of the same things, but not with the same agencies," Anderson said, adding that the acquisition gives both companies growth potential in areas where they previously have only enjoyed limited success.
The deal enables Logicon to offer a complete arsenal of high-end IT services and support and gives Federal Data easier access to Defense Department and other government niches, Anderson said. Logicon's areas of expertise include command, control, communications and intelligence; weapons systems; and training and simulation.
"This fit just like a glove for us in our strategy for growth," he said.
Phil Finnegan, senior analyst at the Fairfax, Va.-based Teal Group, a defense and aerospace research and consulting firm, said the acquisition is a good fit for Northrop Grumman for several reasons.
"Northrop Grumman had a problem because they have done a good job of replacing revenues from the B-2 stealth bomber program, but they need to do more," Finnegan said. "IT has been a good area for them. They've made four acquisitions in IT since 1997, but this acquisition is important because it takes them further into commercial IT, which has higher growth than defense IT."
The transaction is valued at US$302 million and is expected to be complete within 45 days, pending governmental approval. At that point, Anderson and Dan Young, president and CEO of Bethesda, Md.-based Federal Data, will head a transition team composed of representatives from both companies to discuss myriad issues, including the Federal Data brand name; the location of corporate offices and personnel; and potential layoffs and internal job changes.
Young said Federal Data employees found out about the acquisition on Wednesday morning with the rest of the world, and although he anticipates "a lot of vultures hanging around" to try and lure away employees, he said he does not expect a backlash from workers.
"The senior executives have been briefed and given guidance, and we're setting up a site on our intranet where employees can ask questions and we can get the right answers out to people," Young said. "This is not something we're taking casually."
The Carlyle Group, the private investment firm that bought Federal Data in 1995, had been in discussions with Northrop Grumman since January about a possible acquisition, Young said.
This is not the first time the two companies have done business together, Finnegan said. This acquisition comes on the heels of a deal in July in which Northrop Grumman sold its commercial aerostructure group to the Carlyle Group for $1.2 billion, and they have also worked together on acquisitions in the past, he said.