Defense spending has changed over the last few years, with money "coming out of war-based and troop-based areas and into intelligence- and signal-processing capabilities," explains Craig Bondy (pictured), managing director of GTCR. The Chicago private equity firm recently agreed to sell portfolio company Six3 Systems Inc. to CACI International Inc. (NYSE: CACI), a provider of information products and services to government customers, for $820 million.

Six3 provides services aimed at the intelligence community, the U.S. Department of Defense and civilian security agencies. The McLean, Va., company was formed in 2009 by GTCR and Robert Coleman, the former president of ManTech International Corp. (Nasdaq: MANT).

"We partnered with Bob and brought in as CFO Jack Pearlstein, which was the fourth time we partnered with Jack," recalls Bondy. (Pearlstein also served as an executive at GTCR-backed Solera Holdings, DigitalNet Holdings and AppNet.)

"Intelligence technology had gotten to the point where the ability to collect data was exceeding the government's ability to process it," Bondy explains. "For example, there was a tremendous amount of video information coming out of Iraq and Afghanistan from unmanned aerial vehicles, or drones, but there wasn't the ability to process, analyze and do something with that information. Similarly, there was a lot of forensic and biometric information coming off weapons and explosive devices that were not getting analyzed for their intelligence value, such as identifying who our adversaries were."

Together, GTCR and Coleman set out to assemble a series of assets and technologies that they figured would be "very valuable in high-growth areas of the intelligence community." Six3 also sought to take advantage of defense spending trends, as money was "coming out of war-based and troop-based areas and into intelligence- and signal-processing capabilities," Bondy says.

Over the next few years, Six3 made four acquisitions. In 2009, the company bought Harding Security Associates Inc., a provider of identity intelligence, forensics analysis and security services, and Bit Systems Inc., a company that specializes in signal processing systems and data analysis. In 2010, Six3 purchased Novii Design LLC, a provider of large-scale data fusion systems and cyber-security software for the intelligence community. In 2012, Six3 bought Ticom Geomatics, Inc., which specializes in geo-location and signal intelligence.

Bringing the four companies together under one roof enables Six3 to work on bigger projects and compete for bigger government contracts. For example, Six3 participated in the National Counterterrorism Center's investigation of the Boston Marathon bombing, in which investigators pieced together data from video, cell phones and financial systems to try to identify the terrorists.

Now is the right time for Six3 to grow within a larger organization, such as CACI, Bondy says.

"In a declining defense budget and during a government shutdown, our ability to sell Six3 is really a representation of the strategic significance this asset has in the industry. Six3 is unique in its capabilities and size. There aren't any pure-play intelligence solutions out there, which is why it was attractive to a number of parties."

The deal is subject to regulatory approval.

Bank of America Merrill Lynch (NYSE: BAC) is providing committed debt financing for the transaction. Led by Kevin Brunner and Peter Knickerbocker, the bank also acted as exclusive financial adviser to CACI. Squire Sanders (US) LLP provided legal advice to CACI with a team led by Robert Gregg and including Dan Berick, Carl Draucker, Michael Meissner and Barry Pupkin. Also providing financial legal advice to CACI was Latham & Watkins LLP, led by Scott Forchheimer. Providing legal advice to GTCR was Kirkland & Ellis, led by Mark Fennell. The Chertoff Group and CSP Associates served as strategic advisers to CACI.

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