Northrop Grumman has agreed to sell its TASC government consulting business to the private equity firms Kohlberg Kravis Roberts and General Atlantic for $1.65 Billion. This follows the spin-off of CH2M Hill’s information technology group to Golden Gate Capital in October as a separate entity now called Critigen. The large multi-year government contracts of these firms made them attractive targets with stable revenue streams.
Both groups had considerable geospatial consulting arms, with TASC’s 5,000 employees much larger than the 700 employees at Critigen. In July TASC received the contract for a $43.5 million indefinite delivery/indefinite quantity contract to provide systems engineering, integration, production, fielding and logistics for the U.S. Marine Corps’s geospatial intelligence support.
In the case of Northrop, the sale was predicated by stricter requirements for government military contractors that stipulate that the companies cannot provide consulting services to the government while also selling it products. Northrop explored other options, including a spin-off with an IPO, before choosing the equity firm buyout route.
The activity speaks to improved credit markets more than anything else. The technology integrators have made great headway in the geospatial space, and that trend is likely to continue under new ownership. The scale of projects are on the rise as these tools are being applied to larger and more complex global change issues. The larger firms provide a good foundation for large-scale systems in the government space.