​M&A: CIO-SP3 Prime Sotera is Acquired

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KeyW Enters Into Definitive Agreement to Acquire Sotera Defense Solutions

“SUMMARY OF STRATEGIC AND FINANCIAL BENEFITS

Together, KeyW and Sotera expect to provide significant benefits to customers, employees and shareholders alike:

Provides New and Enhanced Access to Agencies within the IC: Sotera will add high-priority new customer agencies to KeyW's existing IC portfolio, including highly sought-after FBI and DHS customers, and create additional inroads at new areas of the DoD (e.g., Army Intelligence). The new customer base is expected to accelerate KeyW's organic expansion plan.

Adds Significant Scale, Creating Unique, IC-Focused Provider: The transaction will create a pure-play IC-focused services provider with an estimated $535 million of pro forma 2017 revenue and approximately 2,100 skilled employees, with approximately 80% having Top Secret and above clearances. The scale of the combined companies will provide a more competitive cost model to drive additional growth.

Adds New and Complementary Capabilities for IC Customers: Sotera will add complementary capabilities to KeyW's existing suite in agile software and solution development, cyber security and data analytics. In addition, the new KeyW will offer customers advanced emerging technologies focused on machine learning and big data solutions.

Provides Access to Large Portfolio of Prime Contracts and IDIQ Vehicles: Sotera will bring more than 12 prime IDIQ and GWAC contract vehicles to the combined company, which will expand KeyW's overall presence in the IC and DoD. The combined contract portfolio provides the opportunity to sell both KeyW and Sotera capabilities to new and existing customers with an enhanced business development function. Sotera's impressive BD infrastructure, combined with KeyW's recently transformed BD function, will accelerate KeyW's goal of having the IC's leading BD capability going forward…”

G2X TAKE: With a shrinking pool of primes as a result of acquisition (see Aquilent or Lockheed) and no on-ramp on the horizon, it is always worth noting when a new competitor enters the market.

Sotera has had some good success using the CIO-SP3 vehicle with notable wins at FBI and USDA, but nothing of significance in terms of prime experience on CIO-SP3 or any vehicle in the Federal Health space as of yet. Outside of a few small actions, Health does not appear to be a focus for acquiring firm KeyW either. Worth monitoring as focus areas can change, but in the near term, this acquisition should have limited bearing on Federal Health sector tasks that are released through this vehicle. 

While KeyW has two wins alone on this vehicle that account for more than $90M in revenue, we suspect that won't stop firms from reaching with an offer to take this vehicle off their hands as intel and DoD appear to be their priority.


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