Madison Dearborn Partners will look for more carveouts in the government-tech sector as it expects to make 5x its money on the sale of LGS Innovations, a source told Buyouts.
Madison Dearborn and CoVant Management said Jan. 30 they were selling LGS Innovations for $750 million to CACI International.
LGS Innovations delivers communications products, R&D and supporting services to U.S. defense, intelligence and civilian agencies and commercial customers globally.
MDP initially invested in LGS in 2014 from Fund VI, which closed on $4.4 billion in 2009.
The PE firm was approached by the buyer and initially was not looking to sell the company, the source said.
MDP grew LGS’s Ebitda roughly 8x to $40 million in 2018 from $5 million in 2014 and saw an opportunity to grow it to $75 million within the next few years, the source added.
Bank of America Merrill Lynch served as financial adviser to LGS Innovations.
Madison Dearborn is investing out of Fund VII, which is more than half deployed. The firm targets about 20 investments for the fund.
MDP is pursuing opportunities mainly across management software, cybersecurity software, healthcare, infrastructure and government technology.
The govtech sector is less competitive and valuations are lower relative to other tech-sector areas, the source said.
“There are hundreds of competitors for commercial technology, but there are maybe just five that are looking for tech investments in the government world,” the source said.
For LGS, MDP partnered with CoVant, led by Joseph Kampf, a well-sourced executive in the technology government space and former CEO of Anteon International, a government-technology-services provider.
From 1996 to 2005, Kampf grew Anteon’s revenue to $1.5 billion from $100 million. A year later, he sold Anteon for $2.2 billion to General Dynamics.
Kampf has also helped MDP put together LGS’s board, which includes William Perry, former secretary of defense, Hugh Shelton, former chairman of the joint chiefs and commander in chief of U.S. Special Operations Command, and Jeff Smith, former general counsel of the CIA.
In its most recent co-investment, in May 2018, MDP and CoVant acquired LinQuest, a provider of space-systems-technology solutions to the U.S. defense and intelligence communities.
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