GTCR Expands Intelligence Contractor Platform

Target: BIT Systems Inc.

Equity Contribution: $30 million+ (Est.)

Sponsor: GTCR Golder Rauner

Seller: BIT Systems Inc.

Financial Adviser: Sponsor: Bank of America, Citizens Bank, SunTrust Bank:

Legal Adviser: Sponsor: Kirkland & Ellis LLP ; Seller: Mullin Richter & Hamilton LLP

GTCR Golder Rauner has agreed to buy BIT Systems Inc., a company that designs software and satellite signal processing systems used by government agencies like the Central Intelligence Agency and the National Reconnaissance Office to collect and process intelligence, Craig Bondy, a principal at the Chicago firm, told Buyouts.

The purchase of the Dulles, Va.-based company marks the second acquisition for Six3 Systems, a platform GTCR launched in April to target companies in the national security and defense intelligence industries. The company made its first purchase in July, buying Harding Security Associates Inc., a McLean, Va.-based company that specializes in biometric security, which involves identifying people based on physical or behavioral traits.

Terms of the deal were not disclosed, though GTCR typically invests more than $30 million of equity in its deals. The firm funded the deal with about 50 percent equity and 50 percent debt. Bank of America, Citizens Bank and SunTrust Bank provided senior debt of about 2.25x EBITDA, while GTCR provided junior capital, Bondy said. The acquisition of BIT Systems is expected to close in the next two weeks.

With the addition of BIT Systems, Six3 Systems will generate more than $200 million in revenue, employ about 800 people, and have profit margins in more than 10 percent, Bondy said.

GTCR created Six3 Systems in partnership with Robert Coleman, a longtime executive in the industry. The idea was to create an intelligence contractor with three main business lines: biometric intelligence (which the company obtained through its acquisition of Harding Security); signal intelligence (which the company will gain from BIT Systems); and cyber security.

Bondy said that Coleman, the former president and COO of ManTech International, a national security contractor that specializes in cyber security, sourced the BIT Systems deal through his relationship with the founders of BIT Systems—Tom Ladd, Tim Lewis and Brad Worsham. The co-founders began speaking with Coleman and Bondy about a deal last summer.

Moving forward, at least one goal is to expand Six3 Systems’s client base to include more government agencies, such as the National Security Agency, Bondy said.

The BIT Systems investment comes out of GTCR’s ninth fund, a $2.27 billion pool that closed in 2006 and is now about 60 percent invested. Bondy said the firm will likely create three to five more platforms through Fund IX.