GOVERNMENT CONTRACTOR

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1 GOVERNMENT CONTRACTOR QUARTERLY MARKET UPDATE Q In This Issue A New Era of Stability (Finally?) 1 A New Era of Stability (Finally?) 2 Public Company Valuation Multiples & Select Financial Metrics 3 M&A Transactions 4 Select Market Activity 5 Industry and Agency News It seems that finally the sky is no longer falling on government contractors. With sequestration in the rearview mirror and the Department of Defense moving away from the LPTA contracting environment, we are seeing the government contracting arena potentially moving into an era of more consistency. However, the question remains whether this new consistency is a good thing for contractors. New reports show that defense spending dropped nearly 8 percent in However, many critical civilian agencies increased their budgets reinforcing how heightened wartime spending could truly be behind us. We also continue to see a rise in bid protests and an acquisition process that is very inefficient. While many experts point to procurement solutions, the federal government is a long way from seeing true acquisition reform. From an M&A perspective, there were some very significant deals that were consummated in Q Much of this activity was driven by seeking opportunities in new contracting arenas and agencies. It is clear that the era of unbridled dramatic growth is a thing of the past. As a result, successful contractors have become used to the new way of doing business- fight in the trenches, no holds barred, slow and steady growth. 6 Representative Transactions 7 Contact Information SC&H CAPITAL is an investment banking firm dedicated to advising the owners of middle market companies on merger and acquisition transactions, capital raises, and corporate finance projects. SC&H Capital has successfully closed 60+ transactions over the past eight years. One Year Relative Performance: Over the 52-week period ending March 31, 2015, the Prime Defense Contractor index was up 20.8% while the Other Defense Contractor index was up 6.3%. Over the same period, the benchmark S&P 500 was up 10.4% while the benchmark Russell 2000 index increased 6.8%. Indexed at 3/31/2014 Close Year Relative Performance S&P 500 Russell 2000 Primes Other Defense Indexed at 3/31/2012 Close Three Year Relative Performance: Over the 36-month period ended March 31, 2015, the Prime Defense Contractor index gained 98.7% and the Other Defense Contractor index increased by 56.4% compared to the benchmark S&P 500 and Russell 2000 indexes which had gained 45.7% and 49.0%, respectively. 3 - Year Relative Performance S&P 500 Russell 2000 Primes Other Defense Source: Capital IQ 1

2 PUBLIC COMPANY VALUATIONS MULTIPLES AND SELECT FINANCIAL METRICS Large Prime Contractors ($ in Millions of USD, except for per share info) Recent % off Trailing Twelve Months Forward Stock Price 52 - Week Market Enterprise EV / EV / EV / EV / Company Ticker 3/31/2015 High Cap Value Revenue EBITDA Revenue EBITDA The Boeing Company BA $ (5.5%) $ 105,714.5 $ 101, x 11.2x 1.1x 9.4x Honeywell International Inc. HON $ (1.7%) $ 81,427.4 $ 81, x 12.0x 2.0x 10.0x Accenture plc ACN $93.69 (3.2%) $ 58,673.8 $ 55, x 11.3x 1.8x 10.8x Lockheed Martin Corporation LMT $ (2.0%) $ 63,685.6 $ 68, x 10.5x 1.5x 10.5x General Dynamics Corporation GD $ (7.1%) $ 44,815.9 $ 43, x 10.0x 1.4x 9.6x Raytheon Company RTN $ (3.6%) $ 33,575.0 $ 34, x 9.7x 1.5x 10.2x Northrop Grumman Corporation NOC $ (6.6%) $ 31,935.4 $ 34, x 9.3x 1.4x - Large Prime Contractors Median 1.5x 10.5x 1.5x 10.1x Large Prime Contractors Mean 1.5x 10.6x 1.5x 10.1x Other Defense Contractors ($ in Millions of USD, except for per share info) Recent % off Trailing Twelve Months Forward Stock Price 52 - Week Market Enterprise EV / EV / EV / EV / Company Ticker 3/31/2015 High Cap Value Revenue EBITDA Revenue EBITDA L-3 Communications Holdings Inc. LLL $ (5.4%) $ 10,414.9 $ 13, x 10.4x 1.2x 10.6x Computer Sciences Corporation CSC $65.28 (10.9%) $ 9,207.5 $ 9, x 7.3x 0.8x 4.4x Harris Corporation HRS $78.76 (3.3%) $ 8,200.4 $ 9, x 8.8x 1.9x 8.4x Leidos Holdings, Inc. LDOS $41.96 (11.1%) $ 3,110.3 $ 3, x 9.2x 0.0x 0.0x CACI International Inc. CACI $89.92 (2.5%) $ 2,172.7 $ 3, x 10.5x 0.9x 10.2x Engility Holdings, Inc. EGL $30.04 (38.7%) $ 1,092.3 $ 1, x 13.1x 0.6x 6.6x ManTech International Corporation MANT $33.94 (3.7%) $ 1,269.5 $ 1, x 9.9x 0.7x 9.9x ICF International Inc. ICFI $40.85 (6.6%) $ $ 1, x 11.8x 0.9x 8.9x NCI, Inc. NCIT $10.33 (21.3%) $ $ x 5.3x 0.3x 4.4x Other Defense Contractors Median 1.0x 9.9x 0.8x 8.4x Other Defense Contractors Mean 1.0x 9.6x 0.8x 7.0x Government Services Average EBITDA Multiple Samples 12.0x 3/31/2014 3/31/ x Government Services Average Revenue Multiple Samples 3/31/2014 3/31/2015 TEV/EBITDA 10.0x 8.0x 6.0x 4.0x 2.0x 9.5x 10.4x 8.0x 9.6x 9.8x 8.3x TEV/Revenue 1.4x 1.2x 1.0x 0.8x 0.6x 0.4x 0.2x 1.3x 1.4x 0.6x 0.8x 1.3x 1.4x 0.0x Aerospace & Defense IT Services Diversified 0.0x Aerospace & Defense IT Services Diversified Source: Capital IQ Note: Data as of 3/31/14 and 3/31/15 Aerospace & Defense: NOC, LMT, GD, BA, RTN, HON, LLL IT Services: LDOS, CACI, MANT, EGL, NCIT Diversified: CSC, HRS, ICFI, ACN 2 Government Contractor Quarterly Market Update Q2 2015

3 NOTABLE M&A TRANSACTIONS ENGILITY AND TASC COMPLETE $1.38 BILLION MERGER In February, Engility completed its $1.3 billion acquisition of TASC, a leading professional services provider to the national security and public safety markets -- closing one of the biggest mergers in the Washington market last year. The combined company will employ a total of 11,000 employees, with 4,000 in the Washington, D.C. area, and sales in excess of $2.5 billion. TASC s brand will be retained post-transaction. With the purchase, Engility executives said they hoped to save $35 million by 2016 as a result of cutting back on leases and other measures. Both companies are based in Chantilly, Va. HARRIS MAKES $4.75 BILLION DEAL FOR EXELIS Harris Corporation announced that it is acquiring Exelis for $4.75 billion, which many believe signals further consolidation among mid-size defense companies. The deal brings together two of the largest government contractors. Together, they would generate about threefourths of their revenue from the U.S. government and become the 11th-biggest federal contractor, according to Bloomberg News. The deal will significantly increase the size of Harris, adding $3.25 billion in revenue to the company s $5 billion in revenue. The transaction is expected to close in June. SAIC TO ACQUIRE SCITOR In March, SAIC announced that it entered into a definitive agreement to purchase Scitor, a provider of systems and solutions for the Intelligence Community (IC). The $600 million deal is aimed at helping SAIC, which has a market capitalization of $2.5 billion, expand its offerings to the Intelligence Community and Air Force markets following its spinoff of Leidos Holding Inc in ACCUVANT AND FISHNET COMPLETE $1.5 BILLION MERGER Accuvant and FishNet Security, two leading providers of information security services and solutions, officially completed their $1.5 billion merger. This move brings together the two organizations to create a new provider with a broader suite of services, solutions, expertise, and expanded reach to provide a more global security offering. The combined company will launch its new name and marketing brand in the second half of 2015, with each company operating under its existing name and brand in the interim. ARROW ELECTRONICS COMPLETES ACQUISITION OF IMMIXGROUP In March, Arrow Electronics completed its acquisition of value-added distributor immixgroup in a move that increases Arrow s presence in the federal market. Arrow, a provider of products, services, and solutions to industrial and commercial users of electronic components and enterprise computing solutions, takes a big step into the public sector IT market with this acquisition. MAXIMUS COMPLETES ACENTIA ACQUISITION On April 1st, Maximus announced that it had completed the acquisition of Acentia, a provider of systems modernization, software development, program management, and other information technology services and solutions to U.S. federal government civilian and health agencies. The $300 million deal will allow Maximus to leverage Acentia s health-related contracts with agencies such as Health and Human Services, Centers for Disease Control and Prevention, the Defense Health Agency, and Food and Drug Administration. Maximus funded the deal and related costs and expenses with cash on hand and $225 million borrowed under its revolving credit facility. 3 Government Contractor Quarterly Market Update Q2 2015

4 SELECT MARKET ACTIVITY Date Closed / Announced* Target Buyers/Investors 03/31/2015 immixgroup, Inc. Arrow Electronics, Inc. (NYSE:ARW) 03/26/2015 Agilex Technologies, Inc. Accenture Federal Services LLC Deal Value ($ in millions) Business Description - immixgroup provides IT services for software and hardware manufacturers and federal and state government agencies. It offers business services, contract management, as well as IT solutions. - Agilex provides mission and technology consulting, software and solution development, and system integration services to the national security, healthcare, and public sectors. 03/16/2015 Sidus BioData ByteGrid Holdings LLC - Sidus BioData provides managed hosting solutions and compliance services for commercial businesses, government agencies, life sciences/medical device, and health IT companies. 03/09/2015* Acentia, LLC Maximus Federal Services, Inc Acentia provides technology and management solutions to healthcare, financial, and regulatory markets. It offers strategy and planning in the areas of Data-as-a- Service (DaaS) and analytics, as well as predictive modeling and cloud operations. 03/05/2015 Urban Robotics, Inc. OGSystems, LLC - Urban Robotics provides software and hardware solutions for intelligence, surveillance, and reconnaissance (ISR) applications; and remote sensing and geospatial applications worldwide. 03/01/2015* Scitor Corporation Science Applications International Corporation (NYSE:SAIC) 02/27/2015 CloudShield Technologies, Inc. Lookingglass Cyber Solutions, LLC 02/26/2015 TASC, Inc. Engility Holdings, Inc. (NYSE:EGL) 02/09/2015 Orbital Sciences Corp. Orbital ATK, Inc. (NYSE:OA) 02/09/2015* Voltage Security, Inc. Hewlett-Packard Company (NYSE:HPQ) 02/06/2015* Exelis Inc. (NYSE:XLS) Harris Corporation (NYSE:HRS) 02/05/2015 Sapient Corp. Publicis Groupe SA (ENXTPA:PUB) Scitor provides systems engineering, management consulting, and information services, including systems engineering and integration services for airborne, communication, ground, energy, and space systems. - CloudShield Technologies provides deep packet processing (DPP), a technology solution that offers customers intelligent ways to see and manipulate network traffic to fight cyber assaults. 1,100.0 TASC provides enterprise systems engineering, architecture, and solutions for national security and public safety markets. It offers cyber security solutions that include strategic consulting, cyber assurance, and engineering and integration. - Orbital Sciences Corporation develops and manufactures small- and medium-class rockets and space systems for commercial, military, and civil government customers. - Voltage Security, an enterprise security company, provides data protection, datacentric encryption, tokenization, and key management solutions for combating security threats. 5,193.2 Exelis provides command, control, communications, computers, intelligence, and surveillance and reconnaissance (C4ISR) electronics and systems to the DoD and its contractors, as well as other defense and civilian agencies. 3,691.6 Sapient provides strategy, marketing, and technology services that enable clients to identify and act upon opportunities to improve their business performance. 02/02/2015 FishNet Consulting, Inc. Accuvant, Inc. - FishNet Consulting provides information security solutions that combine technology, services, support, and training to protect organizations from information security threats. 01/16/2015 Milestone Intelligence Group, Inc. 01/12/2015 Phase One Consulting Group, Inc. The KEYW Holding Corporation (NasdaqGS:KEYW) 01/08/2015 SafeNet, Inc. Gemalto NV (ENXTAM:GTO) 01/01/2015 Computech, Inc. NCI Information Systems, Inc. - Milestone Intelligence provides cybersecurity, software engineering, system engineering, and test and evaluation services, including integration of cyber defense solutions on DoD platforms and networks. RLJ Equity Partners, LLC - Phase One Consulting Group, Inc. provides IT strategy, organizational transformation, process and business analysis, investment management, solution architecture, solution engineering, agile development, and cyber security solutions SafeNet is an information security company that provides data protection and software monetization solutions to customers across commercial enterprises and government agencies in the United States and internationally Computech provides information technology operations optimization services for government and private clients in the United States and internationally. 4 Government Contractor Quarterly Market Update Q2 2015

5 INDUSTRY AND AGENCY NEWS DEFENSE DEPARTMENT SPENDING DROPS $24 BILLION IN 2014 According to data obtained from the Federal Procurement Data System, Defense Department spending fell $23.7 billion (or nearly 8 percent) in fiscal 2014 even as civilian agencies saw increases in overall spending. The report also found that Federal government-wide contract spending fell $17 billion in fiscal In addition, overall spending fell from $462 billion in fiscal 2013 to $445 billion in However, some civilian agencies, such as the Department of Homeland Security, Health and Human Services Department, and NASA, increased spending in The Department of Veterans Affairs and the Social Security Administration also saw increases in spending. WHITE HOUSE LAYS OUT IDEAS FOR INFORMATION SHARING President Barack Obama sought to spur Congress to action on cybersecurity information-sharing legislation by announcing his own proposal on January 13th. The proposal encourages the private sector to share appropriate cyber threat information with the Department of Homeland Security s National Cybersecurity and Communications Integration Center (NCCIC). DOD SIGNALS MOVE AWAY FROM LPTA ENVIRONMENT Under Secretary of Defense for Acquisition, Technology and Logistics, Frank Kendall, issued a memorandum about when LPTA is appropriate as a source selection process. His memo states LPTA has a clear, but limited place in the source selection best value continuum, and narrowly defines when LPTA is appropriate for DoD procurements. This memo signals a shift away from the LPTA source selection process. AIR FORCE S NEW ACQUISITION PLAN AIMS TO BOOST INNOVATION, CUT COSTS The Air Force is launching a new effort to streamline its large-scale acquisition efforts. This will include working with industry early on in the process in an effort to foster more innovation and reduce costs. The Bending the Cost Curve program, announced by Secretary of the Air Force Deborah Lee James, aims to increase both collaboration with industry and competition among vendors, and differs from other acquisition reform efforts in that it is targeted at specific programs rather than acquisition in general. The initiative also includes a Cost Capability Analysis program that would help vendors early in the process to identify areas where acceptable trade-offs in capability could be made in order to reduce costs. WHITE HOUSE NAMES NEW FEDERAL CIO The White House has named Tony Scott, CIO and Senior Vice President at VMware, as U.S. Chief Information Officer and Administrator of the Office of E-Government. According to Federal Computer Week, Scott plans to make sure the multiple IT initiatives announced in the past couple of budget cycles are put on solid footing for the future. These include digitizing government services, and supporting the PortfolioStat review process to improve efficiency in the $80 billion federal IT budget. NASA A FLAGSHIP EXAMPLE OF PUBLIC CLOUD As agencies look at migrating services to the cloud, NASA s move to a public cloud infrastructure has become a use case for speed, cost savings, and increased security. Approximately 15 percent of NASA s applications and websites are hosted in private clouds with the rest in public or hybrid environments, which is becoming a model for other agencies. 5 Government Contractor Quarterly Market Update Q2 2015

6 REPRESENTATIVE TRANSACTIONS 6 Government Contractor Quarterly Market Update Q2 2015

7 CONTACT INFORMATION SC&H CAPITAL is an investment banking advisory firm to middle market businesses. We support our investment banking activity with a full suite of strategic and financial advisory resources to help companies develop and execute strategic plans and initiatives. The firm s committed team of senior professionals average nearly 20 years of transaction advisory experience across a broad array of industries. Our holistic and customized approach to advising clients enables us to deliver unparalleled results in maximizing shareholder value and achieving strategic objectives. SC&H GROUP puts our subject matter expertise to work for clients in the following areas: Audit Services Tax Services Consulting Services Investment Banking & Advisory Services Personal Financial Planning Services AREAS OF EXPERTISE MERGERS & ACQUISITIONS Sell Side Representation Recapitalizations Buy Side Representation Management Buyouts (MBO) Capital Raises Divestitures EMPLOYEE STOCK OWNERSHIP PLANS (ESOP) ESOP Design ESOP Administration Feasibility Analysis Annual Valuations Transaction Structuring Plan Audits Transaction Financing Accounting Assistance ESOP Implementation Company Financial Statement Transaction Valuations Audits Fairness Opinions S-Corporation Tax Opinions VALUATION ADVISORY Valuations for Financial Reporting Valuations for Consulting & Other Valuations for Tax & Compliance Purposes Purposes Appraisal Services For further information on our Government Contractor Services, Baltimore, MD (410) please contact: SC&H CAPITAL McLean, VA (703) Christopher Helmrath Managing Director chelmrath@scandh.com Matthew Roberson Principal mroberson@scandh.com Greg Hogan Principal ghogan@scandh.com Kevin O Sullivan Principal kosullivan@scandh.com This communication does not represent a solicitation of an offer to sell securities. Securities offered through Stout Causey Capital Corporation, Member FINRA/ SIPC. Licensed to sell securities in California, Connecticut, District of Columbia, Florida, Maryland, Massachusetts, Missouri, North Carolina, New Jersey, New York, Pennsylvania, Tennessee, Virginia, and West Virginia. SC&H Capital is a registered trade name of Stout Causey Capital Corporation, a subsidiary of SC&H Group, Inc. SC&H Group, Inc. is a member of SC&H Group, LLC. 7 Government Contractor Quarterly Market Update Q2 2015