• Enlightenment Capital Portfolio Company Fuels Federal Push Through M&A

    September 6, 2018  |  by Robert J. Terry

    ByteCubed, an Arlington consulting firm that works with a number of government agencies consumed by today’s push for sweeping IT modernization, has acquired a D.C. creative agency with an eye toward bringing better user experiences to the federal marketplace.

    It’s a key step in the growth plans for ByteCubed, which recently brought on a new CEO, and it’s a key piece of the M&A strategy undertaken by Enlightenment Capital, the Chevy Chase aerospace and defense investment firm that first invested in ByteCubed in February.

    And all of the pieces coming together in this deal underscore a handful of key trends in government contracting. There's big bucks, or the potential for lucrative contract dollars, flowing to companies fluent in business intelligence, technology automation and data science work. Government IT services companies in turn need to stand out in a crowded and competitive space, and they're aggressively growing through M&A to do just that.

    ByteCubed said Tuesday it had acquired Chief, which specializes in branding and marketing, design and technology development. Terms of the deal weren’t disclosed.

    Chief has been in business for more than 30 years, and employs 110 people between the District and its office in Portland, Oregon. Chris Lester, Chief’s chief creative officer, wrote on a company blog that with this union the company “will bring the force of creativity to the power of technology and move into a new league.”

    For Enlightenment Managing Partner Devin Talbott, the acquisition furthers the strategy behind the initial investment in ByteCubed. The idea is to marry the company’s technical acumen, cloud-native expertise and commercial approach to government services to a federal market hungry to modernize outdated and expensive legacy IT systems.

    Enlightenment invests in middle-market government, defense and aerospace companies, typically $5 million to $25 million to help management teams develop and build out their companies. That differs from other private equity investors in the space, such as Arlington Capital Partners and Veritas Capital, which typically take over management of their portfolio companies.

    “We can be both in control or in a minority position so it give us flexibility not only to buy a business outright but be a strategic investor,” Talbott said in an interview Wednesday.

    The firm disclosed in a Securities and Exchange Commission filing in April that it wants to raise to $200 million for its third fund, which would bring its total capital raised to $427 million. Talbott has declined to discuss Enlightenment’s fundraising.

    ByteCubed was founded in 2010 by Ahmad Ishaq and counts the departments of Defense and Homeland Security among its customers. The company develops tech tools to streamline business processes and analyze data in real time for effective decision making. ByteCubed also does research and development in cloud computing, data science and analytics, machine learning, user experience and augmented reality.

    ByteCubed reported 2017 revenue of more than $33 million and a headcount of 135, according to Washington Business Journal research, and was recently named to the Inc. 5000 list.

    Greater Washington government contracting saw a similar kind of corporate marriage writ large in 2016 when Booz Allen Hamilton (NYSE: BAH), one of the top five government IT services players by revenue, acquired Laurel-based Aquilent for $250 million. Aquilent’s biggest draw was its focus on user experience, seen with its website design for the U.S. Department of Health and Human Services, the U.S. Postal Service and the General Services Administration.