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Another Government IT Deal
Add Saber’s announced purchase of Covansys’ State and Local Government Practice to the lengthening list of recent government software, IT services and consulting industry deals.
Saber, with sales of about $25 million, is owned by PE group Accel-KKR and specializes in Oracle-based ERP and CRM implementations. The Covansys government unit employs 250, generated 2005 income from operations of $2.8 million on sales of $75.7 million and -- while it also focuses on the IT needs of government clients -- maintains a broader, integration-oriented practice. Saber paid Covansys “up to $40 million” for the business.
The sector supplying government with software, IT services and non-technical consulting is highly fragmented yet growing: the pressures on government bodies to update their aging legacy systems and rising security threats drive demand at the same time that government buyers are attempting to narrow the number of vendors with whom they deal.
From the vendors’ perspective, size counts. It eases the relative cost of marketing, permits them to offer clients one-stop shopping, and allows more economical management of the myriad government certifications and regulations required to do business.
All this adds up to a trend toward M&A-driven consolidation. See SAIC as an example of one of the sector’s larger players gearing up to play this consolidation game.
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