June 2, 2011 / 8:48 PM / 9 years ago

Exclusive: Vangent up for sale, may fetch $1 billion: sources

NEW YORK (Reuters) - Vangent Inc, which provides consulting services to governments, has hired bankers to sell itself in a deal that could fetch roughly $1 billion, five people familiar with the matter said on Thursday.

Bank of America Merrill Lynch (BAC.N) and Goldman Sachs Group (GS.N) are running a sale process for Arlington, Virginia-based Vangent, owned by private equity firm Veritas Capital, these people said.

Vangent, which has estimated annual revenues of around $760 million, is expected to make about $90 million in earnings before interest, tax, depreciation amortization (EBITDA) and could be sold for about 11 times EBITDA, the people said.

The private equity owner hopes to get $1.1 billion to $1.2 billion from the sale of Vangent but it is not clear if bidders could get to the level, one of the people familiar with the matter said.

The process is in the second round and has drawn interest from both private equity bidders and strategic buyers — meaning companies that operate in the same industry as the seller, two people said.

Veritas Capital, a New York-based buyout firm focused on companies providing outsourcing services to government, bought Pearson Government Solutions for about $600 million in 2007 and renamed it Vangent.

Vangent provides consulting, systems integration, human capital management and other outsourcing services to the U.S. federal and international governments. It also has expanded into government and commercial health care services with acquisitions in recent years.

Vangent has more than 7,000 employees. Its customers include the U.S. defense, education, health, justice and state departments, as well as the Centers for Medicare and Medicaid Services.

Representatives for Vangent, Goldman Sachs and Bank of America were not immediately available for comment.

The federal IT consulting services sector has attracted robust buyout interest in recent years from private equity firms, led by Veritas Capital, General Atlantic, Kohlberg Kravis Roberts & Co (KKR.N) and Providence Equity Partners.

In April, Providence announced a $1.88 billion deal to buy U.S. defense consulting company SRA International Inc SRX.N, beating out several private equity and strategic bidders.

Veritas was founded by Robert McKeon in 1992. In 2010, it bought Enterprise Integration Group, which advises government agencies on weapons platforms, from Lockheed Martin Corp (LMT.N) for about $815 million.

Reporting by Soyoung Kim; Editing by Richard Chang and Carol Bishopric

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