August 2014 Market Update - Aronson LLC

805 King Farm Boulevard, Suite 300 | Rockville, Maryland 20850 | P 301.231.6200 | F 301.231.7630 | aronsoncapitalpartners.com

August 2014 Market Update: Defense Technology & Government Services

Investment Banking

Larry A. Davis Partner

(301) 231-6225 [email protected]

Philip J. McMann Partner

(301) 231-6202 [email protected]

Tim P. Schmitt Vice President (301) 222-8285

[email protected]

http://www.aronsonllc.com/

Rapid Growth in Healthcare IT Continues Federal Healthcare IT Update Healthcare IT remains as one of the largest and fastest growing segments of government spending, with both civilian and military agencies issuing contract vehicles and task orders in an effort to structure and stabilize IT systems. Due to an expanding utilization of the cloud and accelerated digitization of records, federal agencies are struggling to meet requirements set by the federal government such as the Managing Government Records Directive.

Healthcare Motivations The rapid growth of healthcare IT in the federal budget is being driven by requirements for the improvement of patient care; reduction of fraud, waste and abuse; and overall cost efficiencies through more efficient processes. The digitization of patient records allows doctors and medical professionals to utilize information in order to improve patient treatment. Along with individual treatment, record management creates massive amounts of data that medical professionals can use to analyze healthcare trends.

According to OMB’s “Improper Payments Overview,” federal agencies reported an improper payment rate of 3.5% in 2013. This resulted in approximately $106 billion of incremental costs. Medicare is one of the worst offenders in this group with improper payments of almost $50 billion, while Medicaid generated another $14.4 billion of losses. Reconciliation of these losses could finance nearly all of the major Healthcare IT procurement spending. The federal government therefore has made it an urgent priority to upgrade the inefficient systems in efforts to reign in the improper payments.

Lastly, next generation healthcare technologies and applications developed by the commercial sector are gaining traction by federal healthcare agencies. Research has shown that the cost of traditional billing is $1.58 per claim opposed to $0.85 for electronic billing. Improved cost efficiency will not only make federal healthcare programs more affordable for the government, but can make healthcare more affordable to the population.

M&A in the Federal Healthcare IT Market Acquisitions of federal healthcare IT targets have accounted for 7% of all government services transactions in the last 12 months. On the supply side, there are a limited number of targets with F&O revenue streams, since most healthcare oriented agencies rely heavily on preferential awards. On the demand side, both traditional Department of Defense firms as well as Federal Civilian focused buyers are targeting healthcare IT acquisitions. The below exhibit summarizes examples of traditionally focused DoD firms that have acquired healthcare IT firms in efforts to diversify away from declining defense budgets and gain exposure to this more rapidly growing market.

Traditionally DoD Focused Healthcare IT Acquirers

Meanwhile, large businesses with an existing Federal Civilian presence also look for healthcare IT acquisition targets that either provide a new capability, contract vehicle, or customer access, as summarized below: Traditionally Federal Civilian IT Acquirers

DOD Focused Buyer

Federal Healthcare IT Target

IT Buyer

Federal Healthcare IT Target

Rapid Growth in Healthcare IT Continues


M&A Focus: Key Contract Vehicles Nearly all of the healthcare IT acquisitions have involved targets with a presence on a key contract vehicle. For example, 3 of the 9 small businesses on the $12 billion Veterans Affairs’ T4 IDIQ contract have been acquired by buyers seeking an entrance into the VA’s IT budget, including funding for VistA. The Veterans health Information Systems and Technology Architecture (VistA) houses over 2.5 million gigabytes of data around medical and pharmaceutical patient encounters, and makes it available for public analysis. Upon the eventual recompete of the VA T4 contract in 2016, we expect similar acquisition activity by acquirers that are not successful in the initial award.

The Centers for Medicare & Medicaid Services (CMS) Enterprise Systems Development (ESD) program was awarded in 2007 and will provide up to $4 billion for the design, development, testing, maintenance and other IT work intended to advance current data systems. Eight of the nine small businesses with the CMS ESD contract have been acquired.

There are similar examples of buyers making acquisitions to gain access to the key HCIT contract vehicles at other agencies, including NIH, CDC, and DHA.

Healthcare IT M&A Outlook We expect buyers to continue to target healthcare IT acquisitions over the next 24 months. Despite rapid growth in healthcare IT, most public acquirers still derive less than 20% of their IT services revenues from healthcare agencies, and often have significant capability and customer gaps in this market.

In addition, there are a number of private equity backed acquirers focused on the healthcare IT space that are effectively executing on roll up strategies to accelerate growth, creating another segment of acquirers with ample access to capital. The main hurdle will continue to be the concentration of preferential awards amongst small business targets, and the lack of well positioned targets that are willing to exit in light of the optimistic outlook for this sector.

CIO-SP3

CDC CIMS

D/SIDDOMS III

CMS ESD

VA T4

Acquisition Targets on Key Healthcare IT Vehicles


Cyber Threat Leads to New Army Brigade US Army’s New Cyber Protection Brigade and Potential Branch After continued growth in the number, and sophistication, of cyber-attacks in the US, the Army has decided to create a new Cyber Protection Brigade and possibly announce the creation of a Cyber Branch in October. The Brigade is currently working under the US Army Network Enterprise Technology Command at Fort Gordon, Georgia.

This recent announcement follows the activation of the 780th Military Intelligence Brigade in October 2011. The 780th Brigade, which is headquartered at Fort Meade, MD, was the Army’s first computer network operations brigade. The creation of the new Cyber Protection Brigade reinforces the growing cyber threat and highlights the Army’s lack of top cyber talent to combat the threats. Command Sgt. Maj. Rodney Harris, Army Cyber Command, stated “these soldiers are so unique, and they're so skilled and they're so few.”

In order to attract and retain top cyber engineering talent, the Army is discussing the creation of new military occupational specialties, including the proposed 17C cyber warfare specialist and the 17A cyber warfare officer specialties. The 17 series of job specialties will blend signal intelligence and military intelligence skills, and strives to create a cyber career track for military professionals. The creation of the 17 series further demonstrates the convergence of SIGINT and cyber data feeds and the importance of having skill sets in both competencies.

Command Sgt. Maj. Rodney Harris’ statements highlight the federal government’s continued dependence on the government contracting industry to meet federal cyber requirements. Secondly, we believe that the ongoing lack of federal cyber engineering talent reinforces the need for automated cyber products developed by the commercial sector that identify and protect against zero day attacks.

Selected M&A Transactions


Novetta Acquires SigInt Technologies

On August 11, 2014, Novetta Solutions, LLC, a portfolio company of Arlington Capital Partners announced the acquisition of SigInt Technologies, LLC. SigInt was founded 9 years ago to deliver mission-focused technical solutions for the nation’s critical intelligence needs.

SigInt is a Digital Signal Processing (DSP) and intelligence analysis solutions provider that develops signal-processing algorithms, sub-systems, as well as complete SIGINT collection systems. They are well versed in advanced and obscure waveforms from all around the world. SigInt also provides training on signal processing waveforms, algorithms and techniques used in the intelligence field.

Novetta is a provider of Identity, Cyber and Social Analytics to the federal government. SigInt’s group of engineers will be integrated into Novetta’s Cyber SIGINT and Discovery Division (CSD) based in Columbia, Maryland. The acquisition provides Novetta with new technical capabilities that the company will use in its growth as a leading provider of advanced services for the intelligence community.

Terms of the deal were not disclosed.

Preferred Systems Solutions Acquires Global Services & Solutions, Inc. On August 15, 2014, CM Equity Portfolio company Preferred Systems Solutions, Inc. (PSS) announced that it had acquired Global Services & Solutions, Inc. (GSS). GSS provides acquisition and program support, engineering and technical expertise, and consulting services for major weapons systems acquisition programs.

GSS capabilities include Engineering & Technical Services, Acquisition Support Services, Program Management, and Quality Assurance and Safety. They provide a wide range of engineering and technical expertise to develop innovative solutions in a cost constrained environment. GSS provides support services from concept inception through product development, delivery and sustainment. Program Management solutions include Program Office Operations, Contracting Best practices and Industry Engagement.

Preferred Systems Solutions provides Information Technology, Engineering, Program Management, Intelligence Services, Staffing Services and Deltek Solutions to mostly DoD clients. GSS’ president, Jim Ballard, will become president of PSS Federal Services Group. The acquisition will strengthen PSS’ presence in the Department of Defense community and according to Mr. Ballard, “The depth and breadth of PSS' capabilities will allow [GSS] to provide best-in-class services to a broad range of federal agencies."


Information Innovators, Inc. Acquires GlobalNet Services, Inc. On September 5, 2014, DFW Capital Partners announced that portfolio company Information Innovators, Inc. (Triple-i) had acquired GlobalNet Services, Inc. (GNSI). The Rockville, Maryland based company provides IT systems engineering, software development and general IT services to the federal government.

GlobalNet Services’ primary customers are the Food and Drug Administration and the Department of Education. GlobalNet’s other services include Enterprise Search, Geospatial Information Systems, Business Intelligence, Mobile & Telework, Hosting & Cloud, and Portals and CMS, with Government, Commercial Non-Profit and Academic clients. Triple-i is planning to use this transaction to utilize GlobalNet’s Software Engineering Institute (SEI) Capability Maturity Model Integration (CMMI®) Level 3 appraised processes and procedures.

Ori Reiss, Founder and CEO of GNSI said, "Together with Triple-i, GNSI can expand its reach into other U.S. government agencies and will provide us with the resources to accelerate our growth, broaden capabilities to serve our clients and enhance career opportunities for our staff."


Acquirer

Target

Acquirer

Target

Acquirer

Target


Government Services Industry Performance


Last 12-Month Returns

Last 12-Month Enterprise Value / EBITDA

Source: CapIQ Mid-Tier Index: BAH, LDOS, XLS, CACI, MANT, EGL, ICFI, KEYW, VSEC, NCIT Tier-1 Index: BA, LMT, GD, RTN, NOC, LLL

80

100

120

140

160

Sep-13 Dec-13 Apr-14 Aug-14

Inde

xed

Perf

orm

ance

LTM 8/31/2014 Returns

Tier-1: 23.8% S&P: 22.7% Mid-Tier: 8.2%

4.0x

5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

Sep-13 Dec-13 Apr-14 Aug-14

Ente

rpris

e Va

lue/

LTM

EBI

TDA

8/31/2014 EV/LTM EBITDA

Tier-1: 9.2x Mid-Tier: 8.6x


Public Company Comparables


USD in Mi l l ions , exc luding share prices

Price Annual % of Equ i ty En terprise LTM LTMCompany 08/31/14 High Low High Value Value Rev. EBITDA Rev. EBITDA Rev. EBITDA CY13A CY14P CY13A CY14P

Mid-Tier Federal Service Providers

Booz Allen Hamilton Holding Corporation 22.18$ 25.32$ 16.61$ 87.6% 3,240$ 4,576$ 5,373$ 531$ 0.9x 8.6x 0.9x 8.8x 10.0% 9.9% (2.2%) (5.9%)

Leidos Holdings, Inc. 37.65 64.36 34.00 58.5% 2,815 3,965 5,495 352 0.7x 11.3x 0.8x 9.1x 6.3% 8.7% (10.8%) (12.1%)

Exelis Inc. 17.19 21.44 14.67 80.2% 3,237 3,492 4,542 604 0.8x 5.8x 0.8x 6.1x 13.9% 12.6% (12.8%) (7.5%)

CACI International Inc. 72.12 80.77 66.09 89.3% 1,696 2,922 3,565 332 0.8x 8.8x 0.8x 9.1x 9.2% 9.1% (4.3%) (1.2%)

Science Applications International Corporation 46.12 46.56 29.40 99.1% 2,213 2,479 3,959 247 0.6x 10.0x 0.6x 9.6x 6.2% 6.8% (13.8%) (6.7%)

ManTech International Corporation 28.98 31.32 26.36 92.5% 1,080 1,104 1,974 140 0.6x 7.9x 0.6x 8.4x 7.4% 6.8% (10.5%) (18.4%)

Engility Holdings, Inc. 35.14 46.25 27.87 76.0% 619 969 1,371 115 0.7x 8.4x 0.7x 7.9x 9.1% 8.3% (15.0%) 0.1%

ICF International Inc. 33.78 44.34 30.53 76.2% 658 782 983 88 0.8x 8.9x 0.7x 7.6x 9.0% 9.1% 1.3% 8.3%

The KEYW Holding Corporation 11.83 23.09 9.71 51.2% 436 522 281 15 1.9x 34.3x 1.7x 19.6x 7.0% 6.3% 22.7% (0.6%)

VSE Corp. 59.33 74.86 39.98 79.3% 318 410 461 63 0.9x 6.5x 0.9x 6.5x 13.6% 14.3% (13.7%) (4.2%)

NCI, Inc. 9.14 13.12 4.83 69.7% 118 106 325 19 0.3x 5.6x 0.3x 5.4x 5.9% 6.7% (9.8%) (5.2%)

Mean 0.8x 10.6x 0.8x 8.9x 8.9% 8.9% (6.3%) (4.8%)

Median 0.8x 8.6x 0.8x 8.4x 9.0% 8.7% (10.5%) (5.2%)

Tier 1 Prime Contractors

The Boeing Company 126.80$ 144.57$ 104.62$ 87.7% 91,374$ 89,096$ 88,425$ 8,280$ 1.0x 10.8x 1.0x 9.1x 9.4% 10.4% 6.0% 3.5%

Lockheed Martin Corporation 174.00 177.19 121.52 98.2% 54,912 57,645 44,836 6,081 1.3x 9.5x 1.3x 8.7x 11.8% 14.8% (3.9%) (1.2%)

General Dynamics Corporation 123.25 124.85 83.61 98.7% 41,204 41,273 30,809 4,247 1.3x 9.7x 1.4x 9.5x 13.6% 14.3% (0.9%) (3.1%)

Raytheon Company 96.34 102.33 73.81 94.1% 29,935 30,661 22,921 3,404 1.3x 9.0x 1.4x 7.9x 14.1% 16.0% (2.9%) (4.1%)

Northrop Grumman Corporation 127.22 128.66 92.32 98.9% 26,454 28,907 24,150 3,710 1.2x 7.8x 1.2x 7.5x 14.7% 15.5% (2.2%) (3.9%)

L-3 Communications Holdings Inc. 109.95 127.27 90.16 86.4% 9,481 13,195 12,210 1,464 1.1x 9.0x 1.1x 9.1x 11.9% 11.7% (3.9%) (3.9%)

Mean 1.2x 9.3x 1.2x 8.6x 12.6% 13.8% (1.3%) (2.1%)

Median 1.2x 9.2x 1.3x 8.9x 12.7% 14.5% (2.6%) (3.5%)

Defense System / Electronics F irms

Rockwell Collins Inc. 76.98$ 84.06$ 65.76$ 91.6% 10,400$ 12,474$ 4,932$ 1,111$ 2.5x 11.2x 2.4x 10.1x 22.5% 23.4% (1.6%) 10.6%

Harris Corporation 71.39 79.32 56.03 90.0% 7,479 8,553 5,012 1,083 1.7x 7.9x 1.7x 8.0x 22.1% 21.5% (7.0%) (0.8%)

Teledyne Technologies Inc. 97.07 102.40 76.97 94.8% 3,643 4,096 2,339 347 1.8x 11.8x 1.7x 10.2x 14.2% 15.9% 9.9% 2.9%

Cubic Corporation 44.64 56.92 40.69 78.4% 1,196 1,140 1,343 91 0.8x 12.5x 0.8x 8.0x 8.8% 8.9% (3.4%) 5.2%

Kratos Defense & Security Solutions, Inc. 7.53 9.18 6.32 82.0% 435 1,071 892 61 1.2x 17.6x 1.1x 9.7x 8.3% 10.2% (1.9%) (0.6%)

Mercury Systems, Inc. 11.17 14.40 8.42 77.6% 373 326 209 13 1.6x 25.1x 1.4x 8.2x 2.4% 13.7% (4.6%) 0.9%

Mean 1.6x 14.4x 1.5x 9.0x 13.0% 15.6% (1.4%) 3.0%

Median 1.6x 12.2x 1.5x 9.0x 11.5% 14.8% (2.7%) 1.9%

Foreign Contractors

Airbus Group N.V. 61.53$ 75.37$ 54.70$ 81.6% 48,214$ 48,283$ 83,217$ 6,571$ 0.6x 7.3x 0.6x 6.2x 7.0% 9.6% 9.6% (4.2%)

BAE Systems plc 7.38 7.81 6.20 94.5% 23,280 25,186 27,358 3,287 0.9x 7.7x 0.9x 7.3x 11.2% 12.4% 3.0% 0.5%

Finmeccanica SpA 9.36 9.76 5.10 95.9% 5,411 12,512 22,018 1,168 0.6x 10.7x 0.7x 5.8x 5.6% 11.7% 0.9% (21.0%)

Thales SA 55.87 65.73 48.60 85.0% 11,453 11,660 19,382 1,974 0.6x 5.9x 0.7x 5.8x 9.7% 11.6% 4.7% (13.6%)

Cobham plc 4.93 5.46 4.21 90.2% 5,560 6,081 3,010 747 2.0x 8.1x 1.8x 8.8x 24.2% 21.3% 4.3% 2.1%

Serco Group plc 5.15 9.74 5.03 52.8% 2,766 3,737 7,171 373 0.5x 10.0x 0.5x 10.2x 6.2% 4.6% 7.6% 8.6%

Ultra Electronics Holdings plc 29.59 32.94 27.22 89.8% 2,061 2,291 1,229 219 1.9x 10.5x 1.8x 10.0x 17.7% 18.4% (0.2%) 1.8%

QinetiQ Group Plc 3.59 3.96 3.00 90.7% 2,287 2,009 1,986 262 1.0x 7.7x 1.5x 9.3x 15.4% 14.8% (9.6%) (24.4%)

Mean 1.0x 8.5x 1.1x 7.9x 12.1% 13.1% 2.5% (6.3%)

Median 0.8x 7.9x 0.8x 8.1x 10.4% 12.1% 3.6% (1.8%)

Commercial IT F irms

International Business Machines Corporation 192.30$ 199.21$ 172.19$ 96.5% 191,837$ 228,718$ 98,267$ 25,160$ 2.3x 9.1x 2.3x 8.1x 25.1% 26.9% (4.6%) (1.9%)

Accenture plc 81.06 85.88 69.78 94.4% 51,168 47,685 29,312 4,529 1.6x 10.5x 1.5x 9.4x 15.4% 16.4% 2.5% 5.6%

Xerox Corporation 13.81 13.88 9.55 99.5% 15,835 23,004 21,254 2,727 1.1x 8.4x 1.1x 6.9x 11.5% 15.4% (1.4%) (1.4%)

Computer Sciences Corporation 59.79 65.52 46.80 91.3% 8,673 9,140 12,981 1,959 0.7x 4.7x 0.7x 4.2x 14.9% 16.7% (9.3%) (1.4%)

Navigant Consulting Inc. 16.29 19.78 13.72 82.4% 796 975 726 111 1.3x 8.8x 1.1x 7.7x 16.8% 14.1% 1.7% 14.1%

Unisys Corporation 23.41 36.05 19.96 64.9% 1,185 869 3,356 224 0.3x 3.9x 0.3x 2.0x 7.7% 9.5% (6.7%) (3.4%)

Kforce Inc. 20.07 23.80 16.24 84.3% 657 738 1,235 65 0.6x 11.4x 0.6x 10.7x 4.6% 5.5% 6.4% 8.5%

Black Box Corporation 23.65 31.59 19.34 74.9% 367 512 970 63 0.5x 8.1x 0.5x 6.8x 7.9% 6.5% (4.4%) 2.3%

Source: Capital IQ Mean 1.1x 8.1x 1.0x 7.0x 13.0% 13.9% (2.0%) 2.8%

EV: Enterprise Value Median 0.9x 8.6x 0.9x 7.3x 13.2% 14.7% (2.9%) 0.4%

LTM: Trailing Twelve Months

NTM: Next Twelve Months

EV as a Mu lt iple of

LTM NTM EBITDA Margin Revenue Growth


Recent M&A Transactions


Close Date Name Industry Buyer Buyer Class i f icat ion $M /LTM Rev

/LTM EBITDA

Pending SafeNet Cyber / Intel Gemalto Public Strategic 890.0 N/A N/APending Signal Innovations Group, Inc. Cyber / Intel BAE Systems Public Strategic N/A N/A N/A

09/05/14 Global Net Services, Inc. Healthcare IT Information Innovators, Inc. (DFW Capital Partners, Inc.) P/E Backed Strategic N/A N/A N/A08/25/14 Sun Catalytix Other Lockheed Martin Public Strategic N/A N/A N/A08/18/14 Evolve Technology Group Healthcare IT ePlus Public Strategic N/A N/A N/A08/15/14 Global Services & Solutions, Inc. Cyber / Intel Preferred Systems Solutions P/E Backed Strategic N/A N/A N/A08/14/14 Zeta Associates Cyber / Intel Lockheed Martin Corporation Public Strategic N/A N/A N/A08/11/14 SigInt Technologies Cyber / Intel Novetta P/E Backed Strategic N/A N/A N/A08/11/14 Lighthouse Security Group Cloud / Data Analytics IBM Corp. Public Strategic N/A N/A N/A08/04/14 NetCentrics Inc. Cyber / Intel Haystax Technology, Inc. P/E Backed Strategic N/A N/A N/A08/04/14 MdotLabs Cloud / Data Analytics comScore Public Strategic 4.5 N/A N/A08/01/14 Barco Orthogon Technical Services Exelis Public Strategic N/A N/A N/A07/29/14 Global News Intelligence Cyber / Intel Novetta P/E Backed Strategic N/A N/A N/A07/29/14 Marbella Technologies Healthcare IT GetWellNetwork Private Strategic N/A N/A N/A07/01/14 JM Waller Associates Other Versar Public Strategic 13.0 N/A N/A07/01/14 Verizon Communications (Federal Network Systems) IT Services Jacobs Engineering Public Strategic N/A N/A N/A06/30/14 MicroTechnologies LLC (SIGCOM, Inc.) Cyber / Intel UNICOM Government Private Strategic N/A N/A N/A06/27/14 Ventura Solutions Cyber / Intel Boeing Public Strategic N/A N/A N/A06/12/14 Celestech C4ISR Exelis Public Strategic N/A N/A N/A06/11/14 Envision Technical Services IT Services Preferred Systems Solutions (PSS) (CM Equity) P/E Backed Strategic N/A N/A N/A06/02/14 National Security Partners Cyber / Intel Noblis Private Strategic N/A N/A N/A05/29/14 Astrotech Space Operations Other Lockheed Martin Corporation Public Strategic N/A N/A N/A05/27/14 7Delta Healthcare IT ManTech Public Strategic N/A N/A N/A05/12/14 RNSolutions Healthcare IT Dovel Technologies Private Strategic N/A N/A N/A05/09/14 nPulse Technologies IT Services FireEye Public Strategic N/A N/A N/A04/22/14 QinetiQ North America (Services and Solutions Group) IT Services The SI Organization (Veritas Capital) P/E Backed Strategic 215.0 N/A N/A04/21/14 Secure Mission Solutions (RLH Equity Partners) Cyber / Intel Parsons Public Strategic N/A N/A N/A04/02/14 LGS Innovations, LLC (Portfolio company of Alcatel-Lucent) Cyber / Intel Madison Dearborn Partners / CoVant P/E Sponsor 200.0 N/A N/A04/02/13 Viecore FSD Cloud / Data Analytics EOIR Technologies, Inc. P/E Backed Strategic N/A N/A N/A03/31/14 Avaya Government Solutions Inc. (IT Professional Services IT Services Camber Corporation (New Mountain Capital, LLC) P/E Backed Strategic 100.0 N/A N/A03/14/14 Industrial Defender, Inc. Cyber / Intel Lockheed Martin Corporation Public Strategic N/A N/A N/A03/10/14 SecureForce, LLC Cyber / Intel BRTRC Federal Solutions Private Strategic N/A N/A N/A03/05/14 Data Tactics Corporation Cloud / Data Analytics L-3 Communications Holdings Inc. Public Strategic N/A N/A N/A03/03/14 Intific, Inc. IT Services Cubic Corp. Public Strategic N/A N/A N/A02/28/14 Forgentum, Inc. Healthcare IT Fulcrum IT Services, LLC (Grindstone Partners, LLC) P/E Backed Strategic N/A N/A N/A02/28/14 EADS North America Test and Services Division (Airbus Group, IT Services Astronics Corp. Public Strategic 53.0 0.75 x N/A02/19/14 A&N Associates, Inc. Other Tangible Security, Inc. Private Strategic N/A N/A N/A02/19/14 Allied Technology Group, Inc. IT Services ManTech International Corp. Public Strategic 45.0 N/A N/A02/18/14 3 Phoenix, Inc. C4ISR Ultra Electronics Holding plc Public Strategic 87.0 N/A N/A02/18/14 Anaren, Inc. Technical Services Veritas Capital P/E Sponsor 302.7 1.9 x 11.0 x02/10/14 Business Computer Applications, Inc. Healthcare IT Acentia, LLC (Snow Phipps Group) P/E Backed Strategic N/A N/A N/A01/31/14 Dynamics Research Corp. IT Services Engility Holdings, Inc. Public Strategic 202.0 0.7 x 8.2 x01/30/14 ServiceMesh Inc. Cloud / Data Analytics Computer Sciences Corporation Public Strategic 295.0 N/A N/A01/27/14 Commonwealth Technology, Inc. Cyber / Intel MacAuley-Brown, Inc. Private Strategic N/A N/A N/A01/13/14 Entrust, Inc. (Portfolio company of Thoma Bravo, LLC) Cyber / Intel Datacard Group Private Strategic N/A N/A N/A01/07/14 Tactical Micro, Inc. (Relativity Capital, LLC) Technical Services Secure Communication Systems, Inc. P/E Backed Strategic N/A N/A N/A01/02/14 Twisted Pair Solutions, Inc. C4ISR Motorola Solutions, Inc. Public Strategic N/A N/A N/A12/30/13 ARINC Inc. IT Services Rockwell Collins, Inc. Public Strategic 1,390.0 2.3 x 12.9 x

Target Information Buyer Information EV Information


Recent M&A Transactions


Close Date Name Industry Buyer Buyer Class i f icat ion $M /LTM Rev

/LTM EBITDA

12/18/13 PCO Innovation IT Services Accenture Ltd. Public Strategic N/A N/A N/A12/11/13 Globecomm Systems, Inc. C4ISR Wasserstein & Co. P/E Sponsor 277.0 0.8 x 8.5 x12/09/13 Animal Model Services Business of Advanced BioScience Other BIOQUAL, Inc. Public Strategic N/A N/A N/A12/06/13 OPINICUS Corp. IT Services Textron, Inc. Public Strategic N/A N/A N/A12/06/13 Kimmich Software Systems, Inc. Cloud / Data Analytics Vistronix, LLC (Enlightenment Capital) P/E Backed Strategic N/A N/A N/A12/05/13 Netcentric Technology, Inc. C4ISR Vistronix, LLC (Enlightenment Capital) P/E Backed Strategic N/A N/A N/A11/26/13 Serco Group plc (Transport Solutions business) Technical Services Cubic Corp. Public Strategic 70.0 1.0 x 5.5 x11/22/13 National Technical Systems, Inc. Technical Services Aurora Capital Group P/E Sponsor 307.0 1.7 x 13.5 x11/15/13 Six3 Systems Inc. Cyber / Intel CACI International Inc. Public Strategic 820.0 1.9 x 13.4 x11/13/13 Centurion Research Solutions, LLC Other Deltek, Inc. Private Strategic N/A N/A N/A11/13/13 GreenLine Systems IT Services A-T Solutions, Inc. (CI Capital Partners, LLC) P/E Backed Strategic N/A N/A N/A11/12/13 Information Systems Consulting Group, Inc. IT Services Acentia, LLC (Snow Phipps Group) P/E Backed Strategic N/A N/A N/A11/08/13 GAP Solutions, Inc. Technical Services Tallasi Technology (Bluestone Investment Partners) P/E Backed Strategic N/A N/A N/A11/07/13 HighCloud Security Cloud / Data Analytics HyTrust, Inc. Private Strategic N/A N/A N/A11/01/13 Pacific Defense Solutions, LLC Technical Services Integrity Applications, Inc. Private Strategic N/A N/A N/A11/01/13 Professional Consulting Solutions, Inc. Other Apprio, Inc. Private Strategic N/A N/A N/A10/28/13 W&D Holdings Ltd, Parent Company of Wood & Douglas Ltd Technical Services Ultra Electronics Holdings Public Strategic N/A N/A N/A10/22/13 Symmetricom, Inc. Other Microsemi, Corp. Public Strategic N/A N/A N/A10/11/13 Michael Baker Corp. Technical Services Integrated Mission Solutions (DC Capital Partners) P/E Backed Strategic 312.0 0.5 x 9.5 x10/10/13 Acroamatics, Inc. Other Delta Information Systems, Inc. Private Strategic N/A N/A N/A10/07/13 Sourcefire, Inc. Cyber / Intel Cisco Systems, Inc. Public Strategic 2,700.0 7.5 x 37.6 x

Target Information Buyer Information EV Information

Cyber / Intel 21%

Cloud / Data Analytics

16%

IT Services 24%

Healthcare IT 7%

Technical Services

14%

C4ISR 6%

Other 12%

Target Industry

Public Strategic

44%

Private Strategic

23%

P/E Backed Strategic

26%

P/E Sponsor

7%

Buyer Classification


Representative ACP Transactions


WHO IS ARONSON CAPITAL PARTNERS? Aronson Capital Partners is a leading financial advisor to government services and technology firms. We exercise our special domain expertise in the Defense, Intelligence, and Federal Civilian markets to achieve exceptional results for our clients. In addition to completing more than 100 transactions in the federal sector, our principals have decades of executive level, hands-on experience in the industry – a key differentiator that leads to success.

Mergers & Acquisitions • Sell-Side M&A • Buy-Side M&A • Private Equity Platform Acquisitions • Management & Leveraged Buyouts • Divestitures • ESOPs • Asset Sales

Corporate Finance • Recapitalizations & Restructurings • Common & Preferred Equity • Senior Debt • Subordinated Debt • Convertible Debt • Private Equity Investments • Minority Equity Investments

Financial Advisory • Internal Capital Transaction Advisory • Independent Corporate Valuations • Fairness Opinions • Strategic Alternatives Assessments


Documents

August 2014 Market Update - Aronson LLC