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January 23, 2012

Transaction analysis
CIBER to Sell Federal Division to CRGT

Financial Overview 

  • Transaction Value: $40M
  • Transaction Structure: Cash
  • Enterprise Value: $40M
  • EV/Revenue: Estimated 0.27x (based on 2010 Federal division revenue)

martinwolf Analysis

  • International information technology consulting, services and outsourcing company, CIBER Inc.(NYSE:CBR), announced today the sale of its Federal division (CIBER Federal) to CRGT Inc., a leading provider of full life-cycle IT services in emerging technology solutions for the Federal government for national defense, domestic security, and civilian services. The $40M cash transaction will be completed within the next 90 days.
  • CIBER Federal has more than 25 years of experience supporting U.S. Federal Government agencies and civilian customers, offering IT services and solutions such as enterprise architecture, application development, and systems implementation and integration.
  • CIBER's federal practice had roughly $118M in revenue in 2010 and $2M operating income before tax. Assuming the government unit is at its historical average of approximately 10% of revenue, CIBER sold the unit at a premium to the current market valuation of the company as a whole, despite implied lower profitability.
  • This acquisition helps CIBER refocus on its core offerings, which should help it improve its margins. Its revenue had 3-4% growth in 2010 and 2011, but EBITDA declined from 4.6% of revenues in 2009, to 2.3% in 2010, and is now 1.3%.
  • As a result, CIBER is getting punished in the market at only 0.27x EV/REV.
  • Nonetheless, CIBER was up 8% on the news as Wall Street agreed with the plan to refine CIBER's focus, pay down debt, and be the recipient of a healthy purchase price multiple.
  • CRGT's acquisition is a strategic growth move to combine CIBER's broad customer base, solid track record with the Federal Government, and its management team, with the organization's own unique and diverse offerings. In 2010, CRGT had made a similar move, acquiring Johnston McLamb (JM), to expand its services portfolio.
  • This transaction highlights the prevailing bearish trend of the federal market as the federal deficit continues to impact spending. It's a time to consolidate.
  • If government solutions is not a core competency, many companies are divesting these assets to pure-play government service providers. This transaction follows in the path of FusionStorm, Inc. divesting Jeskell, Inc. at the end of 2010 to an investor-backed entity. Similarly, TechTeam Government Solutions, Inc. was also sold in 2010 to a government-focused unit of Jacobs Engineering Group, Inc. (NYSE:JEC).  

  Please click here to read the press release.  

 

martinwolf was not the adviser in this transaction.  

 

To learn more about this transaction or our firm, contact Tim Mueller at [email protected] or (925) 215-2761.    

About martinwolf    

 

Based in Silicon Valley, martinwolf is a leading middle market M&A Advisory focused on companies with services-based business models. Since 1997, our team has completed more than 100 transactions in six countries. We are a five-year member of the Merrill Lynch PS Referral Network, and were selected as ICICI Bank's (India's leading private bank) exclusive strategic partner for acquiring U.S. IT companies. martinwolf is a member of FINRA and SIPC. For more information, visit www.martinwolf.com.

   

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