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M&T Bank Backs DLH Acquisition of Social & Scientific Systems

June 11, 2019, 08:40 AM
Filed Under: Mergers & Acquisitions
Related: M&T Bank

DLH Holdings Corp., provider of innovative healthcare services and solutions to federal agencies, announced that it has acquired privately-held Social & Scientific Systems ("SSS") of Silver Spring, Maryland. The firm, with approximately 400 employees, is a leading public health service organization providing solutions in clinical and biomedical research, epidemiology, health policy, and program evaluation.

SSS utilizes advanced research (including longitudinal studies), data analytics, and secure IT platform services to assist mission-critical public health agencies within the Department of Health & Human Services – including the National Institutes of Health (NIH) and the Centers for Medicare and Medicaid Services (CMS) – along with other healthcare-related institutions.

SSS was purchased for $70 million in cash, or $63 million net of transaction-related tax benefits worth $7 million on a net present value basis.  

DLH estimates that SSS will contribute approximately $65 million, on an annualized basis, to revenue of the Company going forward.  The SSS backlog was approximately $346 million at closing, reflecting the long-term nature of its research and studies contracts. The funded component of acquired backlog was approximately $40 million. SSS will operate as a wholly-owned subsidiary of DLH Holdings Corp. and will be led by Kevin Beverly, its current President.

DLH financed the acquisition through a new 5-year, $95 million, secured bank credit facility. First National Bank of Pennsylvania acted as agent, and F.N.B. Capital Markets and M&T Bank acted as joint lead arrangers. The facility is comprised of a syndicated term loan of $70 million and revolving credit facility of $25 million. The acquisition price and transaction expenses were funded by the term loan plus cash reserves of DLH, with the revolver available to support future cash needs. The interest rate applicable to borrowings is LIBOR plus a spread spread, based on the consolidated leverage ratio of DLH; at closing, the interest rate was 6.42%.

?KippsDeSanto & Co. served as financial advisor to DLH. Hogan Lovells US, LLP and Becker & Poliakoff LLP served as legal advisors to DLH as part of this transaction. The Avascent Group, Baker Tilly, and the Lockton Companies provided consulting services to DLH in connection with the acquisition.

Houlihan Lokey served as financial advisor to SSS; Saul Ewing Arnstein & Lehr, LLP served as legal advisor to SSS.

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