No Deal – Yet

Washington Technology
Ethan Butterfield
February 13, 2006

In any hot mergers and acquisition market, you need sellers to go along with the buyers. The government market has an abundance of small businesses, the most frequent acquisition targets.

But not all small companies are destined to be gobbled up.

When INDUS Corporation of Vienna, Va., in 2003 graduated from the 8(a) small-business program, founder Shiv Krishnan was determined that the company, which provides enterprise management services and Web applications to civilian agencies, would remain independent. He set revenue targets, and this summer reached the second of those by acquiring Aaron B. Floyd Enterprises Inc. and the government network services business of Halifax Corp., both in Alexandria, Va. The deals helped land INDUS in the No. 10 spot on the Top 10 deals of 2005.

The transactions pushed INDUS to $100 million in annual revenue, a size Krishnan said positions the company for goal No. 3: $250 million in annual revenue in the next three to five years.

"At the $250 million level, we will become a significant player in the mid-size market," he said.

INDUS is already of a size and stature that attracts would-be suitors, but Krishnan said he has no problem resisting their advances.

"There's no compelling argument for us to fold INDUS into another large company at this stage," he said.

At $250 million in revenue, however, INDUS will be even more valuable to buyers and possibly even to the public markets, Krishnan said.

"Once we reach that size, we'll have multiple opportunities open to us," he said.

Meanwhile, he's looking at more acquisitions, mostly in the $5 million to $10 million range. But a bigger deal — $40 million to $50 million — could happen by the end of 2006, he said. The focus is on finding companies that will build INDUS' capabilities and customer base.

"What separates the winners from the losers is that the winners focus on specific opportunities and tell a very compelling story to the customers," Krishnan said. "The losers look at every opportunity and think that in a $100 billion market, they should be able to get any contract. That's not a strategy that will survive."