Belcan’s Owner, AE Industrial Partner, Makes Government Services Acquisition for CDI Corp
The owner of Belcan, private equity funds AE Industrial Partner, has acquired Gryphon Technologies, a U.S. defense specialist that counts the Department of Defense as its largest client.
Gryphon was founded in 1997, is headquartered in Washington, D.C., and has a headcount of 600. The company has ER&D capabilities around defense systems, naval architecture, and marine engineering, program management, test and evaluation, cybersecurity and logistics. I estimate its revenues to USD 60m. AE Industrial Partner will combine Gryphon with the Government Services of CDI Corp.
This is the first acquisition that AE Industrial Partner is making for CDI Corp, since its take-over in September 2017. This acquisition is about CDI strengthening its existing government services business: Gryphon doubles the revenues of CDI Corp’s Government Services unit to approximately USD 120m. Both entities have a similar positioning: CDI Corp operates through two groups, CDI Marine and CDI-M&T, and provides services including ship design, naval and aviation engineering. Its two largest clients are the Department of Defense and the Department of Homeland Security.
AE Industrial Partner continues to scale up its three engineering and technical services units: Belcan, CDI Corp, and BHI Energy. The three companies have overlapping businesses, and I had expected a merger or an active asset rationalization activity. This asset rationalization has mostly not happened. One transaction only occurred, with CDI Corp selling its USD 50m aerospace business to Belcan.
AE Industrial Partners has been active in scaling up the government business of Belcan. Still, at this point, Belcan and CDI Corp have different government services capabilities, with Belcan present both IT services and ER&D. CDI Corp is positioned on naval engineering.
Will we see further asset rationalization between the three firms? In all likelihood, AE Industrial Partners would have acted quickly, and at this point, I am not expecting asset transfers anymore.
A final point: the US government services industry has very active in M&A in the past two years, with in the last six months, General Dynamics buying CSRA, and SAIC purchasing Engility. This industry is becoming about scale. Therefore, the question is if there is still a space for mid-sized firms such as Belcan and CDI Corp that have relatively small government businesses.