Last week MacB announced their acquisition of Gray Research of Huntsville, AL, and KosTech. A growing private mid-sized contractor, MacB has reached a revenue threshold where others have opted for an IPO or sale to a larger integrator.
Gray Research: 10 years from birth to acquisition, recent rapid growth
Founded in 1998, Gray Research had just under $29 million in average annual gross receipts in the past three years as of April 2008, according to a self-certifying directory hosted by the federal government.
Assuming Gray now has around $50 million in annual revenue at the time of acquisition, deduction puts Gray with roughly $40 million in revenue combined for trailing years 2 and 3 and thus an annual growth rate in the last three years around 50%.
Where did Gray's growth come from?
From an exchange with Marc Marlin, Vice President with KippsDeSanto which represented Gray Research in the deal: "the Company's ability to win a number of large contracts and BPAs in 2005 and 2006 definitely accelerated the Company's growth, however the foundation for those wins had truly been built over the previous years. The Company's growth has been driven by Company's ability to hire and retain the best and brightest that have carried the Gray Research flag to other customers. Gray Research's NASA business was actually even more strategically focused. In 2002 the Company recognized a favorable funding environment and outlook for future space exploration initiatives (especially those associated with the Constellation Program) and proactively marketed this new customer."
Not to take lightly for a small business, Gray is also ISO 9000:2000 certified.
M&A themes evidenced by the deal, aka what made the deal attractive?
Per Marlin with KippsDeSanto:
MacAulay-Brown: A model for mid-sized growth
Outside of organic growth (around 20%), MacB has made several acquisitions. Here is a timeline of their M&A history, with emphasis on employee and revenue changes:
2001: MacB was acquired in December 2001 by privately-held The Sytex Group, Inc (TSGI). At the time, MacB was generating slightly more than $35 million in annual revenues with 350 employees (source: Minuteman Ventures Newsletter).
2004: TSGI has $425 million in revenue, up roughly 50% from 2003 (source: Washington Technology).
2005: Lockheed buys MacB's parent TSGI for $440 million, and conflict of interest leaves MacB out of the deal.
2006: MacB adds revenue of about $20 million from two acquisitions. Starting with 775 employees MacB adds 75 employees and between $11 million and $12 million in revenue with acquisition of fellow Dayton, OH company GRACAR. With the GRACAR deal, MacB expects combined revenue of $90 million for the year. Then MacB acquired Analytical Solutions Inc. in June adding another $10 million to the year's revenue estimate.
2007: MacB estimates 2007 revenue of $120M as of June 2006 at the time of the Analytical Solutions deal.
2008: MacB acquired TeraTech earlier this year, and now Gray Research and KosTech. As of the Gray Research deal, MacB has 1,200 employees and now expects to exceed $200M and reach $250 million in 2009 (source: MacB / Kipps DeSanto press release).
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