Today…..

1. ‘'The Rush to Acquire: Analyzing the Robust M&A Market for Federal/Defense Technology Companies'Conference: Phase 3 Business Matters: Realizing SBIR ValueJune 3, 2005Paul Serotkin

2. Today….. • Current M&A Environment • The Federal/Defense Technology Company Universe • Seller/Buyer Profiles • M&A Valuation/Deal Pricing • The Technology Differentiator in Federal M&A

3. Minuteman Ventures LLC • M&A advisory firm focused on Federal and Defense Technology market • Manage corporate transactions for private firm owners approaching M&A as either 1) a first time strategic growth path, or 2) a liquidity event • Founder spent most of career heading M&A and Corporate Development functions at federal corporate clients, deeply involved (with SBANE) in effecting passage of SBIR in 1982

4. What Drives the Robust Federal/Defense Technology M&A Market • Post 9-11 funding brought dramatic increases in defense/intel funding • Internet adoption, aging federal workforce gave rise to increased outsourcing to private sector • Leading to….. • Increased company valuations, IPOs and private equity investment in the government contracting sector • Economic conditions ripe for consolidation ….. Low debt capital cost, recovery of capital markets • Industry conditions ripe for consolidation……* highly fragmented market * demand for technology advantages * mid-tier companies with capital looking to grow * strategic bulk seen as key to compete for larger contracts * Bevy of well-positioned firms in intelligence, security, C4ISR, network-centric warfare, law enforcement, public safety yield M&A premium

5. The Federal/Defense Technology Company Universe • Under $100m in revenue, often under $50m • Closely held, few shareholders, with perhaps an ESOP holding a minority position and some option-holders; typically no outside capital • Geographically strong in two, possibly three locations • Having true market presence at two to three agencies • Widely ranging services, systems, products and solutions across a spectrum – - System engineering/integration, training, modeling/simulation, network services, technology R&D, legacy migration, database maintenance, logistics, software application development, program management/acquisition support, systems/platform systems, IT/communication technology • Usually at least five years old, many times 15+ years duration • Founder often involved, at least in ownership, if not operations • Could have some SBSA/8a work remaining

6. Seller Transaction Profile – Federal TechnologyBy Seller Size 150+ transactions since Q4 ’02 <$20m $100m – $250m $50m – $100m $500m + $20m - $50m $250m - $500m

7. Buyer Transaction Profile – Federal Technology (By Acquirer Size) 150+ transactions since Q4 ’02 $100m-$250m $50m-$100m $500m+ < $50m $250m-$500m

8. Large Corporate Buyers Tier 1

9. Mid-Tier Buyers – Tier 2

10. Mid-Tier Buyers – Tier 3

11. Mid-Tier Buyers – Tier 4

12. M&A Valuation – Size/Specialty Matters

13. Technology Advantage Differentiates Federal/Defense M&A

14. Technology Advantage Differentiates Federal/Defense M&A

15. Why the Technology Advantage in M&A Pricing • Leverages buyers into larger programs • Differentiates company from IT services • Battlespace demands intensified • Confluence of science and software • Higher margin potential – • ‘expert’ labor hours • license sales • maintenance

16. Conclusions • Federal/Defense Technology M&A Market remains robust • Buyers come from all size firms; Mid-tier firms stepping up • Technology can be true pricing discriminator • M&A pricing gradation based on size, differentiators • Consolidation figures to continue for some period

17. Contact Data Paul Serotkin President Minuteman Ventures LLC 781 750 8065 781 254 7267 mobile paulserotkin@minutemanventures.com www.minutemanventures.com HQ: Burlington, MA Operations: Huntsville – Patuxent River- Dayton – No. Virginia