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Forbes Article about Veritas, DynCorp: Part II Commentary
Tuesday, July 21, 2009 at 06:35 Back to the article in Forbes discussed yesterday about Veritas founders Robert McKeon and Thomas Campbell. We’re going to skip over the discussion about the supposed origins of strife between McKeon and Campbell over the DynCorp deal and subsequent departure of the latter from DynCorp’s board. Instead we’ll focus today’s post in part on what the Forbes article fails to mention about Campbell’s new firm DC Capital Partners, which has been profiled here on this site.
In the end perhaps it will be Campbell who achieves the most from his unique investment perch within the defense industry. We have remarked previously about the difficulty of 3rd party investors – Veritas among them – to maintain persistent returns from simply doing deals. Defense is a narrow industry, after all. When deal flow is strong, or when a big deal like DynCorp comes along, returns will tend to concentrate for a specialist firm like Veritas. However, when credit tightens and deal flow contracts sharply, Veritas may struggle to compete for quality against cash rich defense firms looking to integrate struggling mid-market firms.
One way to counter such a trend may be exactly the model that Campbell has developed at DC Capital, namely the integrated platform that focuses on rolling up companies around a particular market sector. DC Capital has pursued this strategy so far with its National Interest Security Company (NISC), which the Forbes article mentions is already profitable at around $200M revenue. More than just a concept, Campbell has recruited top management talent into NISC, led by Andrew Maner, former CFO for the Department of Homeland Security.
However, the Forbes article overlooks one of the principle strengths of DC Capital in addition to its platform strategy. In 2007 DC Capital acquired a controlling interest in The Spectrum Group, a consulting group with “over 100 associates – half of which are Admirals and Generals, the remainder are former Political Appointees, former Hill staffers, Corporate officers and lobbyists, and U.S. Government officials.” This is the reason NISC can deploy a deep advisory board for NISC that includes Ambassador Henry Crumpton, General Hagee, Chuck Hagel, General Michael Hayden, Admiral Joseph Lopez… and others, as well as access to the dozens of other brand names at Spectrum.
Tomorrow we’ll do another post of Part III commentary, in which we’ll provide some direct feedback on specific points within the Forbes article, particularly about the DynCorp deal and their current outlook in general.
DC Capital, DynCorp, Veritas in Articles, Players
Reader Comments (5)
A bit on the strategy: DynCorp is pursuing a somewhat similar strategy to DC Capital's. Looking at this year's revenue growth you find that DynCorp received a huge contract for linguist services in Iraq through a JV called GLS. This JV was formed with McNeill Technologies, another Veritas Capital portfolio company. It just makes me wonder if DynCorp will be the platform from which Veritas will build out its business.
can you comment further (or email me) about how DynCorp's strategy is similar to DC Capital's? I see DynCorp expanding across divisions (LOGCAP + Linguist, in addition to the existing aircraft maintenance contracts), but I don't see them creating highly focused functional platforms like DC-Cap. Maybe it's just Veritas trying to encourage teaming across its portfolio.
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