Many investments focused on government services offer recession resistance, said Jeffrey Koonce, a partner at Bernhard Capital Partners, in an interview with PE Hub.
Last week, the Baton Rouge, Louisiana-based private equity firm announced it is acquiring the federal and defense services (FDS) business of VSE Corporation.
“As a full-service provider across land, sea, air, energy and technological assets, the VSE FDS business stands out as a highly specialized and deeply experienced partner supporting some of the country’s – and the world’s – most critical government and military assets,” Koonce said in the deal announcement.
With the acquisition, Bernhard is establishing a government services platform.
Koonce told PE Hub that the business offers diversified services that can weather economic storms.



“We are performing services that must be performed in order for this critical infrastructure, in this case, the Defense Department, to function,” he said. “While that may not be completely recession-proof, it is certainly recession-resistant and performs much better than the general market in times of recession.”
VSEC’s FDS business has many contours and is not dependent on a single line of business, Koonce said. The company provides a suite of services, such as aftermarket distribution and repair services for land, sea and air transportation assets for government and commercial markets.
The business also focuses on parts distribution, supply chain management and logistics, engineering support, and consulting and training services for global commercial, federal, military and defense customers as well as information technology, including 911 data service and energy consulting services.
“We wanted to find a company that has specialized services, with a high barrier to entry and with a long relationship with the government,” said Koonce. “This business was founded in 1969 and has a long history of providing diversified services to the government, and that made it particularly appealing.”
The federal government budgets billions of dollars in annual spend for the defense sector. According to Koonce, Bernhard Capital expects the big spending to continue. “We are not betting on a short-term blip [in] spending in the area; these are services that will need to continue.”
In terms of growth, the firm is targeting both organic strategies that will keep strengthening the platform’s capabilities, and inorganic strategies aimed at extending its geographic footprint and increasing the services that the company offers.
“There will be a lot of synergies available to the platform as we have add-on acquisitions,” Koonce said.
Yesterday, Bernhard announced it is adding Duotech Services, a provider of services for radar systems, to the government services platform.
Although most of the services that VSEC’s FDS business provides are focused on the US government, there is potential to work with partner nations, opening up opportunities for the company to further diversify its offerings.
“The services of the United States are performed around the world, and they are highly integrated with partner nations, and so our services will be performed accordingly and in conjunction with our partner nations,” explained Koonce.
In December, the firm launched another platform investment focusing on the US Department of Energy.
Among its strengths, Koonce said the firm identifies experienced people to guide the investments. In the case of VSE, the firm has Charles Anderson, a retired US Army major general and former president of PAE’s global mission services business unit, as its senior adviser specializing in the government services industry.
Koonce added: “We are very good at operating services companies. We make our money by being operationally proficient rather than financial maneuvers to make a profit. We are not particularly high on the use of debt, but rather we look at being extremely efficient in operating the companies and having a clear plan for growth strategies.”