(Reuters) – Novetta Solutions LLC, a provider of software and IT services to the U.S. intelligence community, is exploring a sale which could value it at more than $650 million, including debt, according to people familiar with the matter.
Novetta’s sale process comes as cuts in U.S. government spending, particularly in the areas of defense and security, have hit companies that rely on government contracts, spurring consolidation in the industry.
Arlington Capital Partners, Novetta’s private equity owner, has hired investment banks Morgan Stanley and Houlihan Lokey on an auction for the company, the people said this week.
Novetta has annual earnings before interest, tax, depreciation and amortization of between $40 million and $50 million, the people added.
The sources asked not to be identified because the sale process is not public. Representatives for Novetta, Arlington Capital Partners, Morgan Stanley and Houlihan Lokey declined to comment.
McLean, Virginia-based Novetta offers data analytics services to government clients working with large sets of data. Its customers include national intelligence agencies, the U.S. Department of Defense and the U.S. Department of Homeland Security.
Technology companies Hewlett-Packard Co and IBM Corp, as well as defense contractors such as Lockheed Martin Corp, Raytheon Co and General Dynamics Corp, could show interest in Novetta, according to the sources.
Representatives from General Dynamics, Hewlett-Packard, Lockheed Martin, and IBM declined to comment. Raytheon did not respond to a request for comment.
A deal for Novetta would be just the latest example of a private equity firm selling a government services portfolio company.
Last month, government services contractor Engility Holdings Inc, acquired TASC, a provider of professional services to government agencies for $1.3 billion. TASC was controlled by affiliates of the private equity firms KKR & Co LP and General Atlantic LLC.
On Sunday, Science Applications International Corp a provider of information technology and engineering services to governments, said it would acquire Scitor Corp, a smaller peer, for $790 million. Scitor is owned by private equity firm Leonard Green & Partners LP.