The Department of Justice on Wednesday said it is moving to block Booz Allen Hamilton’s [BAH] proposed acquisition of the software and analytics company EverWatch, alleging the deal would eliminate competition for an intelligence community customer.
A statement issued by the department Wednesday evening said that the two companies are the only competitors for an operational modeling and simulation services contract in support of the National Security Agency (NSA) and warned that even the acquisition agreement alone reduces competition because a new request for proposals is imminent.
Booz Allen in March announced it had agreed to acquire EverWatch, a portfolio company of the private equity firm Enlightenment Capital, saying that the deal will complement its existing capabilities in artificial intelligence, full-spectrum cyber operations, mission analytics, 5G and technical signals intelligence.
Terms of the proposed acquisition were not disclosed when the deal was first announced but in a statement on Thursday Booz Allen said the price was $440 million and that EverWatch has about 500 employees. Booz Allen expected to complete the deal by the end of June.
“Prior to the merger agreement, Booz Allen and EverWatch competed head-to-head to win this NSA contract,” the government said. “Shortly before NSA was scheduled to release the requests for proposal, Booz Allen decided to buy its only rival instead. The complaint alleges that the merger agreement violates Section 1 of the Sherman Act because it immediately reduced each company’s incentive to bid aggressively.”
The Justice Department also said the proposed deal “substantially lessens competition, in violation of Section 7 of the Clayton Act.”
The Sherman Antitrust Act, which was signed into law in 1890, is designed to prevent monopolies and trade restrictions. The Clayton Act defines illegal business practices that could lead to monopolies.
Booz Allen in a statement released to Defense Daily challenged the Justice Department’s decision and indicated it might fight the move in court.
“The transaction would bring together two companies with complementary capabilities to enhance delivery of mission-critical services in support of our collective national security interests,” the company said. “We continue to believe the transaction would deliver substantial benefits to our government clients in an industry that is highly competitive. We refute any suggestion that the proposed transaction would harm government agencies or taxpayers and are ready to vigorously defend ourselves against any allegation of anticompetitive behavior.”
However, later, the company publicly issued another statement leaving out the willingness to “vigorously defend ourselves against any allegation of anticompetitive behavior.”
The government’s lawsuit was filed in the U.S. District Court for the District of Maryland.
The NSA contract of concern supports signals intelligence data missions.
In addition to the intelligence community, EverWatch on its website lists the Departments of Defense and State as customers. The company is based in Northern Virginia and also has operations in Maryland, near where the NSA is headquartered, and Colorado.