Richly Valued CACI Acquisition Reflects Risks In Defense Deals (From Forbes)

On Wednesday, federal IT provider CACI International disclosed it was paying $820 million to acquire a rollup of several companies involved in supplying support to the intelligence community. The company being acquired is called Six3 Systems, and it was founded in 2009 using funding from a Chicago-based private equity firm. Private equity players are betting heavily on defense services, presumably on the assumption that there will be lucrative transactions as the market segment consolidates in response to softening Pentagon demand. They’re probably right, but when outsiders start betting on areas with limited visibility like intelligence and cybersecurity, there is a high likelihood of miscalculation. Uncertainties are multiplied by political conditions and the fact that short-cycle technical services firms are feeling the pain of budget sequestration ahead of military hardware manufacturers. I have written a commentary about the risks investors face for Forbes, which you can read here.