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Dynamics Research Corp. (DRC) to buy Kadix Systems LLC

Kadix Systems will exit the 8(a) business development program earlier than April 2012.

Announced today, DRC (NASDAQ:DRCO) will acquire Kadix Systems LLC of Arlington, VA for at least $42 million.

Valuation

In 2007 Kadix reported revenue of $23 million and net income of $3.8 million, according to the company. With consideration of at least $42 million, Kadix earns a very attractive multiple of at least 1.8x 2007 revenue.

No small feat, Kadix is CMMI Level 3 certified. DRC is also CMMI Level 3.

Civilian and Homeland Security Gains

With this acquisition DRC gains ground in civilian agencies to complement its defense presence, a move to strengthen civilian market share that is becoming more common as vendors position for war spending and administration changes. DRC's top 4 customers are in defense, accounting for over 85% of its FY07 reported prime obligations.

Kadix will jump start DRC's $2M to $3M per year DHS prime business. Roughly half of Kadix's FY07 prime obligations are from Homeland Security. While both have prime contracts on DHS' go-to EAGLE contract vehicle, Kadix has had more success with it and also has a seat on DHS' new Program Management Support Services (PMSS) contract.

Kadix Prime Contracting Growth

Strong prime obligations growth in last 5 years (Kadix entered the 8(a) program in April 2003):

Fiscal Year $K
2003 $1,689
2004 $7,374
2005 $9,039
2006 $14,920
2007 $25,285
Source: GovWin FPDS Vendor Profiles

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