Stumble It!
Veritas Capital Management: The Defense Turnaround Artists
Overview:
Founded in 1992, New York based Veritas Capital Management is a private equity fund that invests in a broad range of middle market companies through buyouts, growth capital investments, and leveraged recapitalizations. Veritas Capital invests in companies that provide outsourced services to the government - primarily in the areas of defense and aerospace, security, and infrastructure. It has also earned a reputation as a niche defense investor and for turning around troubled defense contractors.
Management Team:
Veritas Capital’s senior management team includes:
Robert B. McKeon is the Founder and President of Veritas Capital. Prior to forming the firm, Robert was the Chairman and one of the founding partners of Wasserstein Perella Management Partners, Co-Chairman and Co-Chief Executive of Wickes Companies, Chairman and Director of Maybelline, Co-Chairman of Pneumo Abex Corporation, and a Director at the First Boston Corporation. Robert currently serves as Chairman of the Board of DynCorp International, Aeroflex, and McNeil Technologies and he previously served as the Chairman of Integrated Defense Technologies and Vertex Aerospace.
Hugh Evans (Partner) joined Veritas Capital in 2005. Previously, Hugh was a Partner at Falconhead Capital, a Principal at Stonington Partners, and held various positions with Merrill Lynch Capital Partners. Hugh currently serves as a Director of Aeroflex.
Ramzi M. Musallam (Partner) joined Veritas Capital in 1997. Previously Ramzi worked at Pritzker & Pritzker, Berkshire Partners, and Chemical Bank (now JP Morgan). He currently serves as a director of DynCorp International, Aeroflex, Vangent, McNeil Technologies, and Continental Electronics.
Other key members of the management team include Joe Benavides, Principal (formerly with the Blackstone Group and Credit Suisse First Boston); Jeffrey C. Weber, Principal (formerly with Lehman Brothers Merchant Banking and US Army); Jeffrey P. Kelly, Vice President (formerly with Goldman Sachs and Morgan Stanley); and Daniel H. Sugar, Vice President (formerly with Miller Buckfire & Co.).
Defense & Aerospace Advisory Council
Veritas Capital established the Defense & Aerospace council to advise the firm about industry trends and new investment opportunities. Members include:
General Richard E. Hawley - United States Air Force (Ret.); Commander, Air Combat Command; Commander, Allied Air Forces Central Europe; and Commander, US Air Forces Europe.
General Barry R. McCaffrey - United States Army (Ret.); Commander-in-Chief, US Southern Command; and Director, Office of National Drug Control Policy.
Admiral Joseph W. Prueher - United States Navy (Ret.); Commander-in-Chief, US Pacific Command; and Ambassador to the People's Republic of China.
Admiral Leighton W. ("Snuffy") Smith - United States Navy (Ret.); Commander-in-Chief, Allied Forces Southern Europe; and Commander-in-Chief, US Naval Forces Europe.
William G. Tobin - Korn/Ferry International; and Chairman, Aerospace Sector.
General Anthony C. Zinni - United States Marine Corps (Ret.); and Commander-in-Chief, US Central Command.
Portfolio:
Key defense related portfolio components include:
Tracing its origins to 1946, Virginia and Texas based DynCorp International provides a broad range of (and sometimes controversial) mission-critical outsourced technical services to civilian agencies, military, and commercial customers. Core competencies include law enforcement training and support, security services, base operations, logistics support, and aviation services and operations. In early 2005, Veritas Capital acquired Dyncorp from Computer Sciences Corp. in a US$850 million transaction with roughly US$775 million in the form of cash (US$100 million reportedly from Veritas Capital) and the balance in the form of senior preferred stock (Goldman Sachs and Bear Stearns lead the financing arrangement). In May 2006, Veritas Capital took Dyncorp public priced at US$15 a share in a US$450 million IPO (with the Credit Suisse Group AG and Goldman Sachs as underwriters) - seven times the amount of its initial investment.
Founded in 1937, Plainview New York based Aeroflex Incorporated provides highly specialized microelectronics and test and measurement equipment to the global aerospace and defense and broadband communications markets. In May 2007, Veritas Capital acquired Aeroflex in a US$1.1 billion buyout following the termination of a previous US$1 billion merger agreement with General Atlantic LLC and Francisco Partners. Golden Gate Capital and Goldman Sachs provided financing for the transaction.
Founded in 1985, Springfield Virginia based McNeil Technologies provides professional and technical services to the US military and various government agencies involved in homeland security, intelligence, and law enforcement. Core competencies includes language translation, security, document management, and business process outsourcing. In mid-2004, Veritas Capital acquired a majority stake in McNeil for an undisclosed sum.
Other portfolio investments include: Continental Electronics (a developer and manufacturer of radio frequency transmitters and digital and analog transmitter systems), Trawick & Associates (an IT services company that provides “end-to-end” IT solutions to the US government, defense, and civilian customers), and Vangent (a provider of consulting, systems integration, human capital management and business process outsourcing services to US federal and international governments, higher education institutions, and corporations).
Past Defense Deals:
Noteworthy defense related deals completed by Veritas Capital include the following:
Integrated Defense Technologies was a platform formed by Veritas Capital through five acquisitions and the integration of eight companies: PEI Electronics, Sierra Research, Zeta Technologies, Excalibur Systems, Metric Systems, Continental Electronics, Enterprise Electronics, and Signia. The combined entity developed and manufactured advanced electronics and technology products for defense and intelligence applications. In February 2002, Veritas Capital took Integrated Defense public at US$22 a share with shares closing on the first day at US$25 for a market capitalization of US$492 million (the offer raised a total of US$154 million). In August of 2003, the company was sold to DRS Technologies for US$550 million.
In 2005, Veritas purchased troubled Washington based MZM Inc. (whose owner was under investigation for alleged payoffs to Representative Randy ``Duke'' Cunningham in exchange for government contracts) for an undisclosed sum and renamed the company Athena Innovative Solutions . The company provided policy, operational, and technical expertise and solutions to government and industry customers in the fields of intelligence, counterintelligence, counterterrorism, security, and homeland defense. In September 2007, Veritas Capital sold Athena to CACI International for US$200 million in cash.
The Bottom Line:
With a Defense and Aerospace Advisory Committee with three generals (one each from the air force, the army, and the marines) and two admirals and a knack for taking over defense contractors in messy situations or with troubled pasts, Veritas is a defense venture capital investor to watch.
Contact Information:
Veritas Capital Management LLC
Floor 41
590 Madison Ave
New York, NY 10022-2524
Phone: (212) 688-0020
Website: http://www.veritascapital.com