AE Industrial Partners makes further scope changes between Belcan and CDI Corp
Private equity (PE) firm AE Industrial Partners (AE) continues to adjust the scope of its portfolio companies and transferred Schafer from Belcan to Gryphon Technologies.
Introducing a larger Gryphon
Shafer is a rather large firm with 400 to 500 employees. The company is headquartered in Arlington, VA, and provides technical engineering services. It serves the military and intelligence communities and the Department of Homeland Security.
The buyer, Gryphon Technologies, is part of AE since September 2018. It is headquartered in Washington, DC and is slightly larger than Schafer with 600 employees across the US. It has engineering capabilities in the naval space, and in aerospace.
The combination of the two firms makes sense as it creates a relatively large engineering service vendor addressing mostly the US Army. So this deals is about scale and complementing capabilities.
What’s left of the government ambitions of Belcan?
Belcan had acquired Schafer in May 2017, with Schafer providing scale to its emerging government services unit. Schafer brought engineering capabilities, while the two smaller Kemtah (January 2017) and Intercom (July 2016) were more on the IT services and security side.
As a result, the transfer of Schafer leaves Belcan with a much smaller and more IT services-centric government service unit.
Also, in September 2018, when AE Industrial Partners had acquired Gryphon, its stated intention was to combine Gryphon with CDI Government Services. It is unclear if this combination has happened.
What are AE’s intentions regarding Belcan and CDI Corp?
Initially, we had thought that AE Industrial Partners would merge Belcan and CDI Corp to create a vendor at scale. This merger did not happen.
AE Industrial Partners started very quickly to build up Belcan in the government and aerospace industries, mostly in the US but also in the UK.
CDI Corpo was on a sharp decline, impacted by its staffing business and the ramp-down of a major staffing business with IBM, before its take-over by AE. The PE, therefore, proceeded differently with CDI Corp than with Belcan: it sold:
- In December 2017 its aerospace and industrial equipment staffing and engineering business to Belcan
- Its IT services staffing business, Talent & Technology Solutions business unit to Artech Information Systems, a staffing business, in October 2018. Talent and Technology Solutions was relatively large with revenues, we estimate, in the USD 50m-100m range.
The transaction leaves Belcan as more specialized in the aerospace sector and to a lower extent in manufacturing, providing engineering and staffing services. And then, Belcan now has a small IT services unit addressing US federal.
The positioning of CDI Corp is a bit more complex to understand: its main staffing business remains its core business by far. It still has engineering staffing and services capabilities, mostly serving the US government and the energy, chemicals, and infrastructure sectors. What is unclear is how the engineering capabilities of the combined Gryphon and Schafer fit into the mostly staffing portfolio of CDI Corp. We are guessing that AE Industrial Partners has not completed the transformation of CDI Corp.