Amentum hits gas pedal with DynCorp acquisition

Not even a year after its creation, Amentum did not wait long to be a buyer and has announced a deal to acquire DynCorp in a deal that brings new customers and broader capabilities as Amentum's CEO explains.

Amentum’s acquisition of DynCorp International announced late Thursday night may for some appear on the surface to be a case of two similar government services companies joining forces to become one.

There is something to that at least on the culture front, according to Amentum CEO John Vollmer. Company culture of course is one box for a prospective buyer to check when looking at a property.

“We heavily support the military and other federal agencies as well, that does drive the culture of our companies,” Vollmer told me Friday. “If you line up our core values and our mission statements, we are very focused on the same type of activities in terms of meeting mission success for our clients.”

Now for the business aspects. Terms of the deal are undisclosed, but it will create a company with at least $6 billion in revenue over the last 12 months and around 34,000 employees in nearly 30 countries.

Germantown, Maryland-based Amentum and McLean, Virginia-based DynCorp expect to close the transaction in the middle of the fourth quarter, or around mid-November.

The deal comes nearly eight months after Amentum, the former AECOM management services unit, was itself acquired by private equity firms American Securities and Lindsay Goldberg for $2.4 billion.

Why so soon for Amentum to make a deal of the size and scope that DynCorp presents with year one as a standalone slightly halfway through?

“If you had asked me a year ago, I would have said we probably wouldn’t be pulling the trigger this early,” Vollmer said.

Though year one has seen the new Amentum record a mix of recompete wins and one significant takeaway from a competitor, albeit under protest.

Because of that, “it’s a lot easier to deploy capital into an organization that’s really, really doing well,” Vollmer said. “That laid the foundation.”

(Check back with WT on Monday for more on how the deal came together and what’s next for Amentum regarding the integration)

Amentum sees the combination as bringing together its services in mission support, IT, cybersecurity, nuclear and environmental remediation, program management, and testing and training with what DynCorp does in the aviation and logistics realms. DynCorp has also increasingly pushed into more intelligence work in recent years.

The transaction certainly gives Amentum more scale, though Vollmer described going from around $4 billion in revenue to $6 billion is not necessarily a “watershed moment” for the company in his view. But becoming a larger organization across more countries, including new places for Amentum, can have these benefits Vollmer outlined.

“We’ll be able to bid a wider portfolio of contracts and… be able to win some very large contracts that we might have had to team with somebody to go after,” Vollmer said. “Those contracts are going to drive growth in the combined company and open up opportunities for all of our employees.”

A core customer of DynCorp is the State Department and that is a place Amentum is not in. That checks another box for a buyer regarding access to a brand new customer.

“One of the areas that (DynCorp has) been focusing on is asset management just as we have, not just supply chain management but asset management and logistics,” Vollmer said. “Our combined organizations are going to make us very strong in a market that is growing exponentially.”

Vollmer also told me that DynCorp is the sole provider of global aviation field maintenance services to the Army’s Aviation and Missile Command through a contract he called one of the company’s “crown jewels.”

On the other hand, Amentum is a provider of ground maintenance services to the military service branches and other Defense Department agencies.

“Something like that (combination) really draws you to want to make a deal here,” Vollmer said.

RBC Capital Markets acted as financial adviser to Amentum. Cravath, Swaine & Moore LLP acted as legal counsel and Covington & Burling LLP was the regulatory and government contracts counsel to Amentum

Citigroup Global Markets Inc. and Morgan Stanley & Co. acted as DynCorp’s financial advisers and Schulte Roth & Zabel LLP was legal counsel.