Serco's North American arm to acquire BTP for defense growth push

Serco Group's North American subsidiary will acquire technology services company BTP Systems to grow defense-related work amid uncertainty over a key health care contract.

Serco Inc. -- the North American subsidiary of Britain’s Serco Group -- has agreed to acquire technology services contractor BTP Systems for approximately $20 million to further expand in the defense sector and add new federal customers.

The companies expect to close the transaction by the end of this year pending regulatory approvals, Serco Group said Tuesday.

Founded in 2003, BTP provides satellite communications, radar modernization, operations and maintenance and sustainment services to help defense customers in particular extend lives of existing systems and conduct phased upgrades with new technology.

The Ludlow, Mass.-based company is a prime contractor for the Air Force and Navy, as well as a subcontractor to larger primes such as Raytheon and Harris Corp. BTP expected to record almost $20 million in revenue and $3 million in earnings before interest, taxes, depreciation and amortization expenses this year, Serco Group said.

BTP cites its areas of expertise as shipboard and submarine satellite communication antenna systems, command post antennas and radar antennas. Serco Group said the addition of BTP seeks to “complement Serco’s existing ship and shore modernization work and enhance our capability in ‘C5ISR’ (Command, Control, Communications, Computers, Combat Systems, Intelligence, Surveillance and Reconnaissance).”

Reston, Va.-based Serco Inc. recorded $944 million in revenue last year, or almost one-fourth of all Serco Group sales. The subsidiary elevated former Serco Inc. defense lead David Dacquino to president and CEO over the summer of this year.

Nearly 30 percent of Serco Inc.’s sales in 2016 came from an Affordable Care Act-related contract for eligibility processing services to support those seeking health insurance. Serco Group expects ACA revenue to be broadly flat this year.

Uncertainty over a potential repeal-and-replace of ACA or possible collapse hangs over that and the company is expected to recompete that contract before its June 30, 2018 expiration date. Serco Inc. first won the five-year, $1.3 billion contract in June 2013.

In half-year results posted Aug. 3, Serco Group said its “position is that structural changes to the ACA will be implemented over a matter of years rather than months” as there is “no clear determination of the future” for either ACA or the overall U.S. federal budget.