The M&A activity in the US defense IT services market continues apace with BAE Systems’ announcement of a $600 million takeover agreement with Herndon, Virginia-based based DigitalNet Holdings Inc.
DigitalNet was formerly the US government sector business of Dutch services vendor Getronics NV. The company was established as DigitalNet in October 2002 following a $223 million takeover by private equity firm GTCR, and it floated on Nasdaq the following year.
DigitalNet employs 2,200 people providing network and systems integration services to the US Air Force and Army, and federal government agencies including Departments of Defense, Homeland Security and Justice.
In the second quarter ending June 30, 2004, DigitalNet more than tripled its net profit to $4.9 million on sales that grew 18% to $97.6 million. The $600 million price tag represents more than twice DigitalNet’s full-year 2003 revenue of $292 million, which shows how highly the IT services opportunity in the US defense sector is valued.
UK-based BAE Systems, which was spun out of British Aerospace Plc. in January 2001, has been looking to build up its US operations through acquisitions. It expects the deal to close before the end of the year, and said the takeover will give it a $1.2 billion business focusing on the US federal IT sector market.