TeleCommunication Systems Inc. [TSYS] this week said it has acquired Solvern Innovations Inc., a provider of wireless communications products and solutions and training to customers in the Department of Defense and intelligence community.
Terms of the deal were not disclosed, although TCS said the purchase included cash, one million shares of its common stock, and an additional consideration based on Solvern’s gross profits in 2010 and 2011.
Stephens Inc. security analyst Tim Quillin pegs the price of the deal at between $25 million and $37.5 million based on comparable acquisition targets. He believes that excluding the earn out provision TCS likely paid on the lower end of the range.
TCS said the addition of Solvern will expand its core competency in secure network communications and encryption, which are integral to its secure satellite communications and wireless carrier business. TCS said that cyber security will be a “high growth communications technology area for the foreseeable future.” Citing the White House Office of Management and Budget, the company also said that the Department of Homeland Security plans to increase the number of its personnel dedicated to cyber security by about 160 percent in 2010.
Solvern, which is based in Maryland, is expected to have $18 million in sales this year and earnings before interest, taxes, depreciation and amortization of about 12 to 15 percent of revenue. Quillin said the company had $9.3 million in sales in 2007 and $12.8 million last year. TCS said it expects the deal to be immediately accretive to earnings. Solvern has more than 100 employees. The company’s products and solutions include project management, system engineering, information assurance, program management and enterprise modernization.