Science Applications International Corp. (NYSE: SAIC) is buying an Arlington health IT firm for $250 million, it announced as it released its first-quarter earnings.
The company has agreed to purchase Halfaker and Associates LLC in a deal that helps it expand its health services market and builds on SAIC's digital transformation strategy, executives from the Reston contractor said Thursday afternoon.
The acquisition, using a combination of cash on hand and incremental debt, brings SAIC a range of technologies that are desirable in a federal market focused on IT modernization, such as digital services, data analytics, cybersecurity and cloud solutions. But the deal also capitalizes on the complex, but growing health IT market, which is a presumed focus of the new Biden administration and has already spurred some mergers and acquisitions activity, including Booz Allen Hamilton Inc.’s (NYSE: BAH) $725 million purchase of Liberty IT Solutions LLC in May.
Founded in 2006 by President and CEO Dawn Halfaker — a former Army captain, Purple Heart recipient and past Women Who Mean Business honoree — Halfaker and Associates has a strong contract presence with the Department of Veterans Affairs, where Bob Genter, SAIC's defense and civilian sector president, said the company is looking to expand its operations, along with other health agency clients.
“This is absolutely a double-bang for your buck acquisition for us,” Genter said in an interview with Washington Business Journal about the acquisition. “It gets us access to some marquee customers that we needed to get access to, most specifically the VA.”
The acquisition is expected to close in SAIC’s second quarter, which ends July 30. Genter said the acquisition is expected to immediately contribute to revenue growth, bringing in Halfaker’s more than 550-person workforce, including the senior leadership team, and about $166 million in annual revenue.
As far as the acquired company’s real estate footprint, Genter said most of Halfaker’s employees work on site at federal facilities, but that SAIC is spending the next 30 days working through its integration plan and will explore office planning.
“There’s no massive synergy idea that we’re shutting down buildings and moving things around,” Genter said.
He said the acquisition strengthens SAIC’s VA contract portfolio, will help scale up Halfaker’s own tech capabilities in the Department of Health and Human Services and makes both entities a stronger combined player in the Defense Health Agency.
It also tracks closely to SAIC’s previously established strategy of being a strong presence in the IT modernization and digital transformation market, most recently evidenced by its of Unisys Corp.’s federal business unit in 2020.
“We’ve been talking about digital transformation and IT modernization for a couple of years now,” said Genter. “We’ve been putting a lot of money to it internally, as well as a focus of our M&A activities, but the focus of getting higher up the food chain in the modernization side as opposed to the [operations and management] business, that’s really exciting for us. This absolutely aligns us in getting access to customers, as well as getting us into the more strategic areas that we want for IT.”
Health IT is a thornier animal when it comes to technology, mostly because of the challenges of upgrading hardware, software and networks that will hold patient health records and other sensitive data.
But both the VA and HHS are in the top three agencies in terms of IT allocations in President Joe Biden's fiscal 2022 budget request, which calls for $15.45 billion in combined spending. And both agencies are embracing modernization efforts within their enterprise networks, including the ever-popular artificial intelligence — which SAIC said Halfaker's data analytics offerings help address.
“If you can solve AI for Veterans Affairs, if you can solve it for HHS, it gets a lot of credibility and a lot of respect across all of our customers, because it is one of the largest data sources in the entire world,” he said. “I think it gives us credibility across the rest of our portfolio as well.”
SAIC reported $1.88 billion in revenue for the first quarter Thursday, a 7% gain over the same period in the prior year that was driven by the acquisition of Unisys Federal and existing and new contract work. In all, the contractor logged $7.06 billion in revenue for fiscal 2021, which ended Jan. 29 — a 10% bounce from fiscal 2020 but a full 51% leap from fiscal 2019.
Sourced from Washington Business Journal - written by Carten Cordell