What Is Belcan Up To, Under Private Equity Ownership?
The acquisition of CDI Corp by private equity (PE) AE Industrial Partners (AEI) brought back some light on Belcan. AE Industrial Partners is indeed also the owner of Belcan Engineering, since Q3 2015.
Belcan is major ER&D staffing and project vendor in the U.S., with a headcount of 6,000 and estimated revenues of ~USD 700m in 2016. Roughly, Belcan is about the same size as CDI Corp.
Under PE ownership, Belcan has expanded from its historical commercial focus on ER&D services in aerospace, power generation, and industrial to U.S. government services, providing both IT services and ER&D.
The company has added through acquisitions, we estimate, ~700 employees, largely thanks to the April 2017 Schafer acquisition. Schafer had 400 employees, and serviced both military and civilian agencies in areas including chemical, biological, radiological, nuclear, defense (CBRNE), space systems, air and missile defense, micro materials, and security. The company is based in Virginia.
The Schafer acquisition complemented two smaller U.S. government IT services acquisitions New Mexico-based The Kemtah Group (January 2017) and Virginia-based Intercom Consulting and Federal Systems (in July 2016).
Meanwhile, Belcan also invested in its core business, making two acquisitions, through two mid-sized organizations:
- In the U.S.: Tandel Systems, in January 2016 (Florida). Tandel services clients in the aerospace and defense sectors in avionics, and software development, and had a headcount of 215
- Outside of the U.S., in the U.K.: East Kilbridge Engineering Services (EKES). EKEA with its 300 engineers brought jet propulsion capabilities (EKES was founded by former Rolls-Royce engineers).
In total, we estimate that less than two years, Belcan has added ~1,200 employees, a 20% increase.
Does it all make sense?
Acquisitions in aerospace and in particular in jet propulsion make sense. The question if Belcan is right in expanding its presence in both IT services and ER&D in the U.S. government sector, given the size of its major competitors and the ongoing consolidation that has happened in the past three to four years (with notably the acquisition by Leidos, a SAIC spin-off, of Lockheed Martin IS&GS business, giving birth to a USD 10bn giant). We suspect that Belcan would have been better off to remain focused on ER&D, and manage its transition from staffing to projects.