“Private-equity firms are focusing on defense service providers rather than hardware makers, making a calculation that military demand for services will hold up better than hardware in the years ahead,” Loren Thompson, a defense analyst with the Lexington Institute….
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This is a big deal. When a company like Cerberus pulls the trigger on purchasing DynCorp, along with previous purchases of IAP Worldwide Services, Tier 1 Group and Radia Holdings, I tend to take notice. Cerberus is reading the tea leaves of defense and positioning themselves to own the companies that will matter in the future. To me, this signifies that defense services, as opposed to defense hardware makers, is the new ‘big sexy’ in defense.
It also tells me that Cerberus is doing their homework. I have never been contacted by their people, but I am sure they have been reading through all the strategy papers and forward looking stuff that is produced by all the think tanks to come to their conclusions. Plus they have two long and expensive wars to study along with the GWOT. They have made their determinations about the future of defense, and these chess moves say a lot. This is a recognition of the fact that contractors are a strategic necessity for our future wars, and now investors are catching on.
The other point on this is DynCorp’s current owner Robert McKeon (Veritas Capital) made a lot of money on this deal. Very impressive return on investment if you ask me. –Matt
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Bill Ballhaus Talks About DynCorp Acquisition
April 12th, 2010
by John Adams
Bill Ballhaus, an ExecutiveBiz 2009 Person to Watch and CEO of security giant DynCorp (NYSE: DCP) shared his thoughts on his firm being purchased by Cerberus for the cool sum of $1.5 billion.
“I believe that under this partnership with Cerberus, DynCorp International will be able to build on our extensive heritage and successful performance to continue to achieve our growth objectives.” He added, “this transaction is a major milestone for DynCorp International’s continued leadership in serving our customers and supporting U.S. national security and foreign policy objectives.”
Link to quote here.
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Cerberus Agrees to Acquire DynCorp in $1 Billion Deal
April 12, 2010
By Emily Thornton and Gopal Ratnam
April 12 (Bloomberg) — Cerberus Capital Management LP, the private-equity firm whose takeover of Chrysler Corp. ended in bankruptcy, agreed to buy defense contractor DynCorp International Inc. for about $1 billion.
Cerberus, run by Steve Feinberg, will pay $17.55 a share, Falls Church, Virginia-based DynCorp said today in a statement. The price is 49 percent more than DynCorp’s closing share price on the New York Stock Exchange on April 9. The deal, expected to close in the third or fourth quarter, is valued at $1.5 billion including the assumption of debt.
DynCorp, which helps train Iraqi police and supports the U.S.’s operation of military bases, is at least the fifth government-services investment that Cerberus has made since 2000, according to data compiled by Bloomberg. Cerberus owns government contractors including IAP Worldwide Services Inc., Tier 1 Group and Radia Holdings Inc.
“Private-equity firms are focusing on defense service providers rather than hardware makers, making a calculation that military demand for services will hold up better than hardware in the years ahead,” Loren Thompson, a defense analyst with the Lexington Institute, a public policy research group in Arlington, Virginia, said in a telephone interview.
DynCorp rose 48 percent, the most since its initial public offering four years ago, to $17.41 at 4:02 p.m. in New York Stock Exchange composite trading.