Houlihan Lokey Advises Quantum Spatial

Transaction: Houlihan Lokey Advises Quantum Spatial

Houlihan Lokey is pleased to announce that Quantum Spatial, Inc. (QSI), a portfolio company of Arlington Capital Partners (Arlington), has been acquired by NV5 Global, Inc. (NASDAQ:NVEE) for $318 million. The transaction closed on December 20, 2019. 

QSI is the largest independent geospatial solutions provider in the United States. The company combines advanced remote sensing technologies and proprietary software, analytic tools, and algorithms to transform the way that clients utilize and value geospatial data. QSI leverages its proprietary technology portfolio to automate the delivery of key analytic insights, such as feature extraction and change detection, which can be used in machine learning applications. The company provides geographic insights to government and highly regulated commercial end markets that need geospatial intelligence to mitigate risk, manage and monitor geographically dispersed assets and resources, and advance scientific understanding. QSI has approximately 600 employees and operates out of eight locations in the U.S., Canada, and India.

The sale of QSI to NV5 highlights the positive market dynamics for well-positioned technology-enabled services companies with a significant government market focus and illustrates several key themes:

  • Engineering services firms remain attracted to government technology assets. This transaction highlights the continued strategic interest of diversified engineering services companies in businesses that feature government market exposure, as well as differentiated technology solutions that can deliver value across multiple end markets. The geospatial solutions offered by QSI have extensive applications across national security, emergency response, infrastructure, and environmental end markets, which NV5 can cross-sell to its broad client base. This transaction follows on the heels of recent acquisitions of government technology assets by large engineering services companies such as Parsons and Jacobs.
  • Buyers are strongly attracted to businesses that benefit from significant competitive barriers to entry. QSI's nationwide geographic scale, substantial cadre of geospatial data professionals, and differentiated technology portfolio enable the company to maintain a significant level of customer satisfaction and retention. QSI's proprietary technology solutions, which encompass autonomous solutions and cloud-based data engagement and visualization platforms, enable the company to maintain a significant competitive advantage in the robust market for geospatial solutions. Both strategic buyers and private equity investors are strongly attracted to businesses that have a high level of competitive differentiation.
  • A track record of innovation enables strong and scalable margins. QSI has leveraged its investments in new remote sensing technologies, automation tools, and workflow enhancements to drive substantial operating efficiencies and maintain an industry-leading margin profile. Companies that leverage technological and process innovation to achieve above-market profitability will continue to garner substantial scarcity value in the marketplace. 

Arlington is a Washington, D.C.-based private equity firm that has managed $4 billion of committed capital. Arlington focuses on middle-market investment opportunities in growth industries, including aerospace and defense, government services and technology, healthcare, business services, and software. Arlington's professionals and network have a unique combination of operating and private equity experience that enables it to be a value-added investor.

Headquartered in Hollywood, Florida, NV5 is a provider of professional and technical engineering and consulting solutions. NV5 serves public and private sector clients in the infrastructure, energy, construction, real estate, and environmental markets. NV5 primarily focuses on five business verticals: construction quality assurance, infrastructure engineering and support services, energy, program management, and environmental solutions. The company operates out of more than 100 locations worldwide.

Houlihan Lokey served as the exclusive financial advisor and assisted in marketing, structuring, and negotiating the transaction on behalf of QSI and Arlington. 

Houlihan Lokey's Aerospace, Defense & Government (ADG) practice is a leading M&A advisor to aerospace, defense, and government services companies in the United States. Since 2016, the practice has closed more than 70 transactions worth more than $11 billion in enterprise value. With a staff of approximately 30 investment bankers in Washington, D.C., London, and Los Angeles, Houlihan Lokey's ADG practice is among the largest dedicated industry banking groups worldwide.

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