Accounting Analysis of Purchase Price Allocations for Government Contracting M&A Transactions October 2006

Transcription

1 October 2006 The McLean Group 1660 International Drive, Suite 450 McLean, VA 22102

2 Contents I. Purpose, Procedures & Highlights II. Accounting for Purchase Price Allocations a) 5 Types of Intangible Assets for US GAAP b) In-Process Research and Development (IPR&D) III. Analysis of Data a) Intangible Assets as a % of Purchase Price b) Customer-Related Intangible Assets c) Amortization Periods d) Disclosed Transaction Costs Appendix The McLean Group Profile Page 2

3 I. Purpose, Procedures & Highlights This analysis is a summary of recent accounting trends and techniques of purchase price allocations for government contracting M&A transactions. Purpose Since June 2001, intangible assets have been required to be identified and separately valued as part of the accounting for M&A transactions. Due to the uniqueness of the government contracting industry and the relatively new accounting rules, the issue has caused difficulties and differences in the financial reporting of acquisitions. The accounting for government contracting transactions has resulted in significant amounts of goodwill relative to the purchase price. Government Contracting Transactions The government contracting industry is a very broad sector and can include many types of businesses. For this analysis, we focus on transactions related to businesses that primarily provide IT and related services to the federal government. This analysis purposefully excludes businesses that primarily provide equipment or other manufactured products. Page 3

4 I. Purpose, Procedures & Highlights, cont. Sources of Information Data in this analysis is based on 78 M&A transactions that we obtained from SEC filings from the following companies: Alien Technology Corporation American Management Systems Analex Anteon International CACI Ciber Digitalnet Dynamics Research EDO Entrust Harris Corporation ICF International, S-1/A (Filed on 9/11/06) Kforce ManTech International MTC Technologies NCI Nortel Networks PEC Solutions Perot Systems SAIC, S-1/A (Filed on 9/11/06) SCB Computer Technology Science Dynamics SI International SRA International Stanley, (S-1/A (Filed on 10/4/06) SYS Technologies TechTeam Global TITAN Tyler Technologies Wireless Facilities Disclaimer This analysis is intended to provide general financial information, not specific accounting or financial advice. The readers of this analysis take full responsibility for the conclusions that they may draw from it. Page 4

5 I. Purpose, Procedures & Highlights, cont. Highlights of the accompanying analysis include: On average, 88% of the purchase price represents goodwill and identified intangible assets. On average, 67% of the purchase price represents goodwill. On average, 20% of the purchase price represents customer-related intangible assets. The description of identified customer-related intangible assets (customer contracts vs. customer base vs. customer relationships vs. backlog) is not consistently disclosed. Non-compete agreements and tradenames, if any, are infrequently valued. Technology related or IPR&D intangible assets, if any, are infrequently valued. Disclosed transaction costs (of the buyer) range from 0.2% to 11.3% of the purchase price, with a median of 1.8%. Page 5

6 II. Accounting for Purchase Price Allocations Purchase Accounting With the release of SFAS 141, Business Combinations, intangible assets must be separately identified and valued at Fair Value. The purchase price from a transaction must be allocated to the acquired net assets. Tangible Assets Tangible assets (such as accounts receivable, fixed assets, and other net assets) are valued at Fair Value, which may not necessarily reflect the accounting book value. Identified Intangible Assets Intangible assets are separately recognizable if they are capable of being separated due to their legal or contractual nature or because they meet the separability criterion. Identified intangible assets must meet the separable and transferable test. Identified intangible assets are amortized over their estimated useful lives. Unidentified Intangible Assets Goodwill is the remaining balance, if any, that results if the purchase price in a transaction exceeds the Fair Value of acquired tangible assets and acquired intangible assets that are separately identified. Goodwill is not amortized, but subject to annual impairment testing on a reporting unit basis. Page 6

7 II(a). 5 Types of Identified Intangible Assets Marketing-Related intangible assets include: trademarks, tradenames, certification marks, logos, and non-competition agreements. Customer-Related intangible assets include: customer lists, backlog, customer contracts, and customer relationships. In accordance with EITF-02-17, Recognition of Customer Relationship Intangible Assets Acquired in a Business Combination, all funded and unfunded contract amounts are included in the analysis, as this is the expected revenue stream from the underlying contracts and customer relationships, including non-contractual relationships. Artistic-Related intangible assets include: books, magazines, plays, literary works, musical works, pictures, photographs, and audiovisual materials. Contract-Based intangible assets include: licensing agreements, royalty agreements, management contracts, lease agreements, construction permits, franchise agreements, broadcast rights, and land use rights. Technology-Based intangible assets include: patented technology, computer software, internet domain names, un-patented technology, databases, and trade secrets. Page 7

8 II(b). In-Process Research & Development Control and Economic Benefit - In accordance with purchase accounting, the Fair Value of in-process research and development ( IPR&D ) should be estimated and the related asset capitalized. IPR&D should be separately recognized if they have characteristics of control and expected economic benefit. An acquiring company s interest in IPR&D is controllable if it can obtain benefit from the asset and control access to the asset. Acquired IPR&D has economic benefit when the acquiring company can demonstrate that the assets will be used for post-combination activities. Measurability - Further, IPR&D must be measurable, that is, it must be able to be estimated with reasonable certainty. The economic benefit expected from an IPR&D effort must be sufficiently determinable such that a reasonably reliable estimate of the future expected net cash flows can be made based on assumptions that are verifiable. For example, a reasonably reliable estimate of Fair Value may be established if the following seven components can be estimated with confidence: 1. A market for the product; 2. Time needed to commercialize and market the product; 3. Potential customers and market penetration; 4. The effect of competitors existing or potential products; 5. The combined enterprise s share of the market; 6. The selling price; and 7. Production and related costs for the product. Page 8

9 III(a). Intangible Assets as a % of Purchase Price Customer Related Intangibles % Other Intangibles % Goodwill* % Total Goodwill and Intangibles as a % of Purchase Price* Date Buyer Target Purchase Price 5/23/2005 Alien Technology Corp. Quatrotec 1,349, ,000 52% 200,000 15% - 0% 67% 8/1/2003 American Management Systems R.M. Vredenburg 51,239,000 14,900,000 29% 2,948,000 6% 32,116,000 63% 98% 4/1/2005 Analex ComGlobal 47,000,000 7,414,000 16% - 0% 34,796,900 74% 90% 7/20/2001 Anteon Training Division of SIGCOM 11,000, ,000 4% - 0% 8,100,000 74% 78% 5/23/2003 Anteon Information Spectrum 91,600,000 4,751,000 5% 500,000 1% 74,335,000 81% 87% 7/27/2004 Anteon Simulation Technologies, Inc. "STI" 15,100,000 2,600,000 17% - 0% 9,500,000 63% 80% 8/11/2004 Anteon Integrated Management Services 29,000,000 5,900,000 20% - 0% 20,600,000 71% 91% 10/14/2005 Anteon Milestone Group 30,900,000 10,500,000 34% - 0% 18,900,000 61% 95% 11/1/2001 CACI DSIC 47,000,000 8,100,000 17% - 0% 23,000,000 49% 66% 8/16/2002 CACI Condor Technology 16,200,000 4,700,000 29% - 0% 10,300,000 64% 93% 10/16/2002 CACI Acton Burnell 29,400,000 6,300,000 21% - 0% 17,600,000 60% 81% 2/23/2003 CACI Applied Technology Solutions 13,100,000 2,200,000 17% - 0% 9,600,000 73% 90% 5/15/2003 CACI Premier Technology Group 48,800,000 14,700,000 30% - 0% 19,300,000 40% 70% 6/6/2003 CACI Rochester Information Systems 1,900, ,000 31% - 0% 2,400, % 158% 10/16/2003 CACI C-CUBED Corporation 36,200,000 6,400,000 18% - 0% 19,500,000 54% 72% 1/16/2004 CACI MTL Systems 4,400, ,000 16% - 0% 1,900,000 43% 59% 3/1/2004 CACI CMS Information Services 28,200,000 3,000,000 11% - 0% 18,300,000 65% 76% 5/1/2004 CACI American Management Systems 420,700,000 61,000,000 14% - 0% 328,800,000 78% 93% 8/1/2004 CACI IMAJ Consulting Limited 3,700, ,000 25% - 0% 2,966,000 80% 105% FY2005 CACI 5 Aggregated Transactions 256,963,000 48,262,000 19% 820,000 0% 167,121,000 65% 84% 3/1/2004 Ciber SCB Computer Technology 61,108,000 12,165,000 20% - 0% 59,327,000 97% 117% 4/1/2004 Digitalnet User Technology Associates 50,384,000 6,543,000 13% 35,000 0% 40,550,000 80% 94% 5/31/2002 Dynamics Research HJ Ford 10,251,000 1,400,000 14% 400,000 4% 6,162,000 60% 78% 12/20/2002 Dynamics Research ANDRULIS 24,572,000 1,300,000 5% 1,340,000 5% 20,549,000 84% 94% 9/1/2004 Dynamics Research Impact Innovations Group LLC 55,312,000 11,500,000 21% - 0% 36,344,000 66% 86% 2/5/2003 EDO AERA 38,362,000 17,100,000 45% 2,920,000 8% 11,626,000 30% 82% 3/10/2003 EDO Darlington 25,889,000 14,400,000 56% 430,000 2% 13,462,000 52% 109% 6/15/2006 Entrust Orion Security Systems 9,135, ,000 11% 769,000 8% 6,880,000 75% 94% 7/6/2004 Harris Corporation Orkand 80,600,000 8,300,000 10% 900,000 1% 49,700,000 62% 73% 1/1/2005 ICF International Synergy 19,500, ,000 4% - 0% 14,100,000 72% 76% 10/1/2005 ICF International Caliber Associates 20,700,000 3,900,000 19% - 0% 13,800,000 67% 86% 1/31/2006 Kforce PCCI Holdings 58,710,000 5,000,000 9% - 0% 43,732,000 74% 83% 8/5/2002 ManTech Aegis Research Corporation 69,085,000 2,700,000 4% - 0% 60,033,000 87% 91% 12/11/2002 ManTech CTX Corporation 35,487,000 4,000,000 11% 400,000 1% 25,981,000 73% 86% 2/28/2003 ManTech Integrated Data Systems 65,558,000 7,500,000 11% - 0% 50,707,000 77% 89% 3/27/2004 ManTech Affiliated Computer (Certain Assets: USAF) 6,500,000 2,000,000 31% - 0% 4,500,000 69% 100% 6/1/2004 ManTech Affiliated Computer (Certain Assets: NATO) 1,500,000 1,000,000 67% - 0% 500,000 33% 100% 5/31/2005 ManTech Gray Hawk Systems, Inc. 101,800,000 12,650,000 12% 3,000,000 3% 75,389,000 74% 89% *Percentages greater than 100% are due to the treatment and presentation of net liabilities assumed in the purchase price. Page 9

10 III(a). Intangibles Assets as a % of Purchase Price, cont. Customer Related Intangibles % Total Goodwill and Intangibles as a % of Purchase Price* Other Date Buyer Target Purchase Price Intangibles % Goodwill* % 10/18/2002 MTC Technologies AMCOMP Corporation 8,570,000 3,025,000 35% - 0% 6,698,000 78% 113% 10/1/2003 MTC Technologies International Consultants 10,206,000 3,500,000 34% - 0% 10,642, % 139% 10/24/2003 MTC Technologies Vitronics 8,964,000 2,500,000 28% - 0% 4,919,000 55% 83% 7/1/2004 MTC Technologies Command Technologies, Inc. 45,000,000 12,000,000 27% - 0% 27,601,000 61% 88% 1/1/2005 MTC Technologies OnBoard Software, Inc. 33,900,000 29,565,000 87% - 0% 2,800,000 8% 95% 12/17/2003 NCI Scientific and Engineering Solutions 20,500,000 2,260,000 11% 1,400,000 7% 15,340,000 75% 93% 11/20/2001 PEC Solutions Troy Systems 18,293,753 3,025,000 17% - 0% 9,921,799 54% 71% 5/28/2004 PEC Solutions IITC 34,000,000 7,600,000 22% - 0% 22,600,000 66% 89% 9/9/2004 PEC Solutions ACT 51,400,000 6,400,000 12% - 0% 39,300,000 76% 89% 7/1/2002 PEROT Systems ADI Technology 50,506,000 2,393,000 5% - 0% 38,793,000 77% 82% 2/20/2003 PEROT Systems Soza & Company 105,663,000 12,200,000 12% - 0% 82,377,000 78% 90% 12/19/2003 PEROT Systems Perot Systems TSI B.V. 117,580,000 7,650,000 7% - 0% 66,700,000 57% 63% FY 2003 SAIC 4 Aggregated Transactions 16,000,000 1,000,000 6% - 0% 14,000,000 88% 94% FY 2004 SAIC 10 Aggregated Transactions 289,000,000 41,000,000 14% - 0% 215,000,000 74% 89% FY 2005 SAIC 4 Aggregated Transactions 236,000,000 44,000,000 19% - 0% 157,000,000 67% 85% FY 2006 SAIC 4 Aggregated Transactions 234,000,000 35,000,000 15% - 0% 186,000,000 79% 94% 5/28/2003 SCB Technology National Systems & Research 16,497,000 2,860,000 17% - 0% 5,480,000 33% 51% 2/14/2005 Science Dynamics Systems Management Engineering, Inc. ("SMEI") 3,120,371 1,133,800 36% - 0% 2,063,833 66% 102% 1/21/2004 SI International MATCOM International 66,405,000 5,000,000 8% - 0% 54,600,000 82% 90% 12/20/2004 SI International Bridge Corporation 32,300,000 2,200,000 7% - 0% 26,200,000 81% 88% 2/9/2005 SI International Shenandoah Electronic Intelligence 76,769,000 12,200,000 16% - 0% 52,684,000 69% 85% 2/27/2006 SI International Zen Technology 55,667,000 6,900,000 12% 150,000 0% 47,535,000 85% 98% 1/4/2002 SRA International Marasco Newton Group 15,900,000 2,200,000 14% - 0% 11,700,000 74% 87% 1/31/2003 SRA International Adroit Systems 38,363,000 4,629,000 12% - 0% 24,516,000 64% 76% 1/12/2004 SRA International ORION Scientific Systems 34,500,000 8,400,000 24% - 0% 26,600,000 77% 101% 4/21/2005 SRA International Touchstone Consulting Group, Inc. 37,000,000 6,500,000 18% - 0% 26,500,000 72% 89% 7/1/2005 SRA International Galaxy Scientific Corporation 98,700,000 12,000,000 12% - 0% 73,400,000 74% 87% 11/2/2005 SRA International Spectrum Solutions Group, Inc. 9,700, ,000 9% - 0% 6,700,000 69% 78% 12/31/2003 Stanley Fuentez Systems Concepts 27,700,000 5,000,000 18% 1,100,000 4% 10,115,000 37% 59% 2/16/2006 Stanley Morgan Research 82,200,000 7,500,000 9% 800,000 1% 69,831,000 85% 95% 4/2/2006 SYS Technologies Reality Based IT Services, Ltd. 9,364, ,000 9% 150,000 2% 6,822,000 73% 83% 12/31/2003 TechTeam Global Digital Support Corporation 6,504,000 3,367,000 52% - 0% 1,728,000 27% 78% 1/3/2005 TechTeam Global Sytel 20,394,000 7,353,000 36% 500,000 2% 14,640,000 72% 110% 9/28/2001 TITAN Datron 48,900,000 5,800,000 12% 1,600,000 3% 22,700,000 46% 62% 11/21/2001 TITAN BTG 135,500,000 8,200,000 6% - 0% 139,200, % 109% 3/21/2002 TITAN Jaycor 103,500,000 2,000,000 2% 1,900,000 2% 38,100,000 37% 41% 12/2/2003 Tyler Technologies Eden Systems 11,857,000 6,281,000 53% 4,890,000 41% 5,667,000 48% 142% 8/4/2004 Wireless Facilities Defense Systems 6,600,000 1,500,000 23% 100,000 2% 4,200,000 64% 88% 1/27/2005 Wireless Facilities TLA Associates 34,000,000 2,100,000 6% 600,000 2% 28,000,000 82% 90% *Percentages greater than 100% are due to the treatment and presentation of net liabilities assumed in the purchase price. High 87.2% 41.2% 126.3% 157.6% Mean 20.1% 1.6% 66.7% 88.3% Median 15.9% 0.0% 71.0% 88.6% Low 1.9% 0.0% 0.0% 40.6% Page 10

11 III(b). Customer-Related Intangible Assets Date Buyer Target Purchase Price Customer Related Intangibles % Notes on Descritption of Customer Related Intangible Assets 5/23/2005 Alien Technology Corp. Quatrotec 1,349, ,000 52% Described as customer relationships and customer backlog. 8/1/2003 American Management Systems R.M. Vredenburg 51,239,000 14,900,000 29% Described as customer relationships. 4/1/2005 Analex ComGlobal 47,000,000 7,414,000 16% Described as contract rights and non-compete agreements. 7/20/2001 Anteon Training Division of SIGCOM 11,000, ,000 4% Described as contract backlog. 5/23/2003 Anteon Information Spectrum 91,600,000 4,751,000 5% Described as contracts and customer relationships. 7/27/2004 Anteon Simulation Technologies, Inc. "STI" 15,100,000 2,600,000 17% Described as contracts and related customer relationships 8/11/2004 Anteon Integrated Management Services 29,000,000 5,900,000 20% Described as contracts and related customer relationships 10/14/2005 Anteon Milestone Group 30,900,000 10,500,000 34% Described as contracts and customer relationships. 11/1/2001 CACI DSIC 47,000,000 8,100,000 17% Description of identified intangible assets not disclosed. 8/16/2002 CACI Condor Technology 16,200,000 4,700,000 29% Description of identified intangible assets not disclosed. 10/16/2002 CACI Acton Burnell 29,400,000 6,300,000 21% Description of identified intangible assets not disclosed. 2/23/2003 CACI Applied Technology Solutions 13,100,000 2,200,000 17% Description of identified intangible assets not disclosed. 5/15/2003 CACI Premier Technology Group 48,800,000 14,700,000 30% Description of identified intangible assets not disclosed. 6/6/2003 CACI Rochester Information Systems 1,900, ,000 31% Description of identified intangible assets not disclosed. 10/16/2003 CACI C-CUBED Corporation 36,200,000 6,400,000 18% Description of identified intangible assets not disclosed. 1/16/2004 CACI MTL Systems 4,400, ,000 16% Description of identified intangible assets not disclosed. 3/1/2004 CACI CMS Information Services 28,200,000 3,000,000 11% Description of identified intangible assets not disclosed. 5/1/2004 CACI American Management Systems 420,700,000 61,000,000 14% Description of identified intangible assets not disclosed. 8/1/2004 CACI IMAJ Consulting Limited 3,700, ,000 25% Description of identified intangible assets not disclosed. FY2005 CACI 5 Aggregated Transactions 256,963,000 48,262,000 19% Described as a contract backlog and customer relationships 3/1/2004 Ciber SCB Computer Technology 61,108,000 12,165,000 20% Described as customer relationships. 4/1/2004 Digitalnet User Technology Associates 50,384,000 6,543,000 13% Described as customer relationships. 5/31/2002 Dynamics Research HJ Ford 10,251,000 1,400,000 14% Described as customer relationships. 12/20/2002 Dynamics Research ANDRULIS 24,572,000 1,300,000 5% Described as customer relationships. 9/1/2004 Dynamics Research Impact Innovations Group LLC 55,067,000 11,500,000 21% Allocated to customer relationships 2/5/2003 EDO AERA 38,362,000 17,100,000 45% Described as customer contracts and relationships. 3/10/2003 EDO Darlington 25,889,000 14,400,000 56% Described as customer contracts and relationships. 6/15/2006 Entrust Orion Security Systems 9,135, ,000 11% Described as customer relationships. 7/6/2004 Harris Corporation Orkand 80,600,000 8,300,000 10% Described as customer relationships. 1/1/2005 ICF International Synergy 19,500, ,000 4% Described as customer-related intangible assets. 10/1/2005 ICF International Caliber Associates 20,700,000 3,900,000 19% Description of identified intangible assets not disclosed. 1/31/2006 Kforce PCCI Holdings 58,710,000 5,000,000 9% Described as customer lists and non-compete agreements. 8/5/2002 ManTech Aegis Research Corporation 69,085,000 2,700,000 4% Described as contract rights. 12/11/2002 ManTech CTX Corporation 35,487,000 4,000,000 11% Described as contract rights and capitalized software. 2/28/2003 ManTech Integrated Data Systems 65,558,000 7,500,000 11% Described as contract rights. 3/27/2004 ManTech Affiliated Computer (Certain Assets: USAF) 6,500,000 2,000,000 31% The assets acquired from ACS include contracts for providing support 6/1/2004 ManTech Affiliated Computer (Certain Assets: NATO) 1,500,000 1,000,000 67% The assets acquired from ACS include contracts for providing support 5/31/2005 ManTech Gray Hawk Systems, Inc. 101,800,000 12,650,000 12% Described as backlog, customer relationships Page 11

12 III(b). Customer-Related Intangible Assets, cont. Date Buyer Target Purchase Price Customer Related Intangibles % Notes on Descritption of Customer Related Intangible Assets 10/18/2002 MTC Technologies AMCOMP Corporation 8,570,000 3,025,000 35% Described as a customer contract and non-compete covenant. 10/1/2003 MTC Technologies International Consultants 10,206,000 3,500,000 34% Described as customer contracts. 10/24/2003 MTC Technologies Vitronics 8,964,000 2,500,000 28% Described as customer contracts. 7/1/2004 MTC Technologies Command Technologies, Inc. 45,000,000 12,000,000 27% Allocated to contracts 1/1/2005 MTC Technologies OnBoard Software, Inc. 33,900,000 29,565,000 87% Allocated to contracts 12/17/2003 NCI Scientific and Engineering Solutions 20,500,000 2,260,000 11% Described as a contracts and client relationships. 11/20/2001 PEC Solutions Troy Systems 18,293,753 3,025,000 17% Described as customer contracts and related relationships. 5/28/2004 PEC Solutions IITC 34,000,000 7,600,000 22% Assigned to customer contracts and related relationships 9/9/2004 PEC Solutions ACT 51,400,000 6,400,000 12% Assigned to customer contracts and related relationships 7/1/2002 PEROT Systems ADI Technology 50,506,000 2,393,000 5% Description not disclosed. 2/20/2003 PEROT Systems Soza & Company 105,663,000 12,200,000 12% Description not disclosed. 12/19/2003 PEROT Systems Perot Systems TSI B.V. 117,580,000 7,650,000 7% Not disclosed. FY 2003 SAIC 4 Aggregated Transactions 16,000,000 1,000,000 6% Not disclosed. FY 2004 SAIC 10 Aggregated Transactions 289,000,000 41,000,000 14% Not disclosed. FY 2005 SAIC 4 Aggregated Transactions 236,000,000 44,000,000 19% Not disclosed. FY 2006 SAIC 4 Aggregated Transactions 234,000,000 35,000,000 15% Not disclosed. 5/28/2003 SCB Technology National Systems & Research 16,497,000 2,860,000 17% Described as existing customer relationships. 2/14/2005 Science Dynamics Systems Management Engineering, Inc. ("SMEI") 3,120,371 1,133,800 36% Described as contractual backlog and customer lists. 1/21/2004 SI International MATCOM International 66,405,000 5,000,000 8% Described as contractual customer relationships. 12/20/2004 SI International Bridge Corporation 32,300,000 2,200,000 7% Described as contractual customer relationships. 2/9/2005 SI International Shenandoah Electronic Intelligence 76,769,000 12,200,000 16% Described as contractual customer relationships. 2/27/2006 SI International Zen Technology 55,667,000 6,900,000 12% Described as contractual customer relationships. 1/4/2002 SRA International Marasco Newton Group 15,900,000 2,200,000 14% Description not disclosed. 1/31/2003 SRA International Adroit Systems 38,363,000 4,629,000 12% Described as contract rights. 1/2004 SRA International ORION Scientific Systems 34,500,000 8,400,000 24% Description not disclosed. 4/21/2005 SRA International Touchstone Consulting Group, Inc. 37,000,000 6,500,000 18% Description not disclosed. 7/1/2005 SRA International Galaxy Scientific Corporation 98,700,000 12,000,000 12% Description not disclosed. 11/2/2005 SRA International Spectrum Solutions Group, Inc. 9,700, ,000 9% Description not disclosed. 12/31/2003 Stanley Fuentez Systems Concepts 27,700,000 5,000,000 18% Described as customer contracts. 2/16/2006 Stanley Morgan Research 82,200,000 7,500,000 9% Described as customer contracts. 4/2/2006 SYS Technologies Reality Based IT Services, Ltd. 9,364, ,000 9% Described as customer relationships and backlog. 12/31/2003 TechTeam Global Digital Support Corporation 6,504,000 3,367,000 52% Described as customer relationship assets. 1/3/2005 TechTeam Global Sytel 20,394,000 7,353,000 36% Described as customer relationship assets. 9/28/2001 TITAN Datron 48,900,000 5,800,000 12% Described as backlog and customer relationships. 11/21/2001 TITAN BTG 135,500,000 8,200,000 6% Described as backlog, customer relationships, and a strategic relationship. 3/21/2002 TITAN Jaycor 103,500,000 2,000,000 2% Described as backlog and customer relationships. 12/2/2003 Tyler Technologies Eden Systems 11,857,000 6,281,000 53% Described as customer base. 8/4/2004 Wireless Facilities Defense Systems 6,600,000 1,500,000 23% Described as backlog and customer relationships. 1/27/2005 Wireless Facilities TLA Associates 34,000,000 2,100,000 6% Described as backlog and customer relationships. High 87% Mean 20% Median 16% Low 2% Page 12

13 III(c). Amortization Periods Customer Related Amortization Period (years) Non-Compete Agreement Amortization Period (years) Technology Amortization Period (years) Tradename Date Buyer Target 5/23/2005 Alien Technology Corp. Quatrotec 700, , /1/2003 American Management Systems R.M. Vredenburg 14,900, ,948, /1/2005 Analex ComGlobal 7,414, /20/2001 Anteon Training Division of SIGCOM 440, /23/2003 Anteon Information Spectrum 4,751, , /27/2004 Anteon Simulation Technologies, Inc. "STI" 2,600, /11/2004 Anteon Integrated Management Services 5,900, /14/2005 Anteon Milestone Group 10,500, /1/2001 CACI DSIC 8,100, /16/2002 CACI Condor Technology 4,700, /16/2002 CACI Acton Burnell 6,300, /23/2003 CACI Applied Technology Solutions 2,200, /15/2003 CACI Premier Technology Group 14,700, /6/2003 CACI Rochester Information Systems 595,000 up to 10 10/16/2003 CACI C-CUBED Corporation 6,400, /16/2004 CACI MTL Systems 700, /1/2004 CACI CMS Information Services 3,000, /1/2004 CACI American Management Systems 61,000, /1/2004 CACI IMAJ Consulting Limited 934,000 5 FY2005 CACI 5 Aggregated Transactions 48,262, ,000-3/1/2004 Ciber SCB Computer Technology 12,165, /1/2004 Digitalnet User Technology Associates 6,543, , /31/2002 Dynamics Research HJ Ford 1,400, , /20/2002 Dynamics Research ANDRULIS 1,300, ,340, /1/2004 Dynamics Research Corporations Impact Innovations Group LLC 11,500, /5/2003 EDO AERA 17,100, ,420, , /10/2003 EDO Darlington 14,400, , , /15/2006 Entrust Orion Security Systems 960, , /6/2004 Harris Corporation Orkand 8,300, , /1/2005 ICF International Synergy 5,000,000-10/1/2005 ICF International Caliber Associates 800,000-1/31/2006 Kforce PCCI Holdings 3,900, /5/2002 ManTech Aegis Research Corporation 2,700, /11/2002 ManTech CTX Corporation 4,000, , /28/2003 ManTech Integrated Data Systems 7,500, /27/2004 ManTech Affiliated Computer (Certain Assets: USAF) 2,000,000-6/1/2004 ManTech Affiliated Computer (Certain Assets: NATO) 1,000,000-5/31/2005 ManTech Gray Hawk Systems, Inc. 12,650, Amortization Period (years) Page 13

14 III(c). Amortization Periods, cont. Customer Related Amortization Period (years) Non-Compete Agreement Amortization Period (years) Technology Amortization Period (years) Tradename Amortization Period (years) Date Buyer Target 10/18/2002 MTC Technologies AMCOMP Corporation 3,025,000-10/1/2003 MTC Technologies International Consultants 3,500, /24/2003 MTC Technologies Vitronics 2,500, /1/2004 MTC Technologies Command Technologies, Inc. 12,000, /1/2005 MTC Technologies OnBoard Software, Inc. 29,565, /17/2003 NCI Scientific and Engineering Solutions 2,260, ,400, /20/2001 PEC Solutions Troy Systems 3,025,000-5/28/2004 PEC Solutions IITC 7,600, /9/2004 PEC Solutions ACT 6,400, /1/2002 PEROT Systems ADI Technology 2,393,000-2/20/2003 PEROT Systems Soza & Company 12,200,000-12/19/2003 Perot Systems Perot Systems TSI B.V. 7,650,000 - FY 2003 SAIC 4 Aggregated Transactions 1,000,000 - FY 2004 SAIC 10 Aggregated Transactions 41,000,000 3 FY 2005 SAIC 4 Aggregated Transactions 44,000,000 9 FY 2006 SAIC 4 Aggregated Transactions 35,000, /28/2003 SCB Technology National Systems & Research 2,860, /14/2005 Science Dynamics Systems Management Engineering, Inc. ("SMEI") 1,133, /21/2004 SI International MATCOM International 5,000, /20/2004 SI International Bridge Corporation 2,200, /9/2005 SI International Shenandoah Electronic Intelligence 12,200, /27/2006 SI International Zen Technology 6,900, , /4/2002 SRA International Marasco Newton Group 2,200,000-1/31/2003 SRA International Adroit Systems 4,629, /04 SRA International ORION Scientific Systems 8,400,000-4/21/2005 SRA International Touchstone Consulting Group, Inc. 6,500,000-7/1/2005 SRA International Galaxy Scientific Corporation 12,000,000-11/2/2005 SRA International Spectrum Solutions Group, Inc. 900,000-12/31/2003 Stanley Fuentez Systems Concepts 5,000, ,100, /16/2006 Stanley Morgan Research 7,500, , /2/2006 SYS Technologies Reality Based IT Services, Ltd. 797, , , /3/2005 TechTeam Global Sytel 7,353, , /31/2003 TechTeam Global Digital Support Corporation 3,367, /28/2001 TITAN Datron 5,800, ,600, /21/2001 TITAN BTG 8,200, /21/2002 TITAN Jaycor 2,000, ,900, /2/2003 Tyler Technologies Eden Systems 6,281, ,710, ,180, /4/2004 Wireless Facilities Defense Systems 1,500,000-1/27/2005 Wireless Facilities TLA Associates 2,100,000 - Page 14

15 III(d). Disclosed Transaction Costs Date Buyer Target Purchase Price Transaction Costs % 5/23/2005 Alien Technology Corp. Quatrotec 1,349, , % 7/20/2001 Anteon Training Division of SIGCOM 11,000, , % 5/23/2003 Anteon Information Spectrum 91,600, , % 5/1/2004 CACI American Management Systems 420,700,000 5,900, % 3/1/2004 Ciber SCB Computer Technology 61,108,000 1,342, % 4/1/2004 Digitalnet User Technology Associates 50,384, , % 12/20/2002 Dynamics Research ANDRULIS 24,572,000 1,100, % 5/31/2002 Dynamics Research HJ Ford 10,251, , % 9/1/2004 Dynamics Research Impact Innovations Group LLC 55,312, , % 2/5/2003 EDO AERA 38,362, , % 3/10/2003 EDO Darlington 25,889, , % 6/15/2006 Entrust Orion Security Solutions 9,135, , % 7/6/2004 Harris Corporation Orkand 80,600, , % 1/1/2005 ICF International Synergy 19,500, , % 10/1/2005 ICF International Caliber Associates 20,700,000 1,300, % 2/28/2003 ManTech Integrated Data Systems 65,558,000 1,000, % 12/11/2002 ManTech CTX Corporation 35,487, , % 8/5/2002 ManTech Aegis Research Corporation 69,085, , % 5/31/2005 ManTech Gray Hawk Systems, Inc. 101,800, , % 6/3/2005 Nortel Networks PEC Solutions 449,000,000 8,000, % 11/20/2001 PEC Solutions Troy Systems 18,293, , % 5/28/2004 PEC Solutions IITC 34,000, , % 9/9/2004 PEC Solutions ACT 51,400,000 4,700, % 2/14/2005 Science Dynamics Systems Management Engineering, Inc. ("SMEI") 3,120,371 40, % 1/21/2004 SI International MATCOM International 66,405,000 1,400, % 12/20/2004 SI International Bridge Corporation 32,300, , % 2/9/2005 SI International Shenandoah Electronic Intelligence 76,769,000 1,200, % 2/27/2006 SI International Zen Technology 55,667, , % 4/2/2006 SYS Technologies Reality Based IT Services, Ltd. 9,364, , % 12/31/2003 TechTeam Global Digital Support Corporation 6,504, , % 1/3/2005 TechTeam Global Sytel 20,394, , % 1/27/2005 Wireless Facilities TLA Associates 34,000, , % High 11.3% Mean 2.6% Median 1.8% Low 0.2% Page 15

16 Appendix The McLean Group Profile Page 16

17 What is The McLean Group? The McLean Group is a middle-market investment bank providing merger and acquisition, business valuation, and corporate finance services. Our focus is on serving middle-market businesses generating between $5 million and $300 million in revenues. Mergers & Acquisitions The McLean Group represents buyers and sellers in prospective acquisitions, mergers, and divestiture transactions of middle-market businesses. Our firm has particular expertise in industries such as technology, government contracting, travel, hospitality and food service, and staffing services. Business Valuation The McLean Group s business valuation practice complements its merger & acquisition practice. Our firm provides a variety of formal business valuations for transaction, financial reporting, equity incentive plans, tax, and general business purposes. Corporate Finance The McLean Group arranges private equity and other financing in amounts ranging from $5 million to $100 million. NASD Registered Broker/Dealer McLean Securities, a wholly owned affiliate of The McLean Group, is a registered broker/dealer with the NASD (National Association of Securities Dealers) and a member of SIPC (Security Investors Protection Corporation). Page 17

18 Our Business Valuation Practice As a core competency and complement to its M&A business, The McLean Group provides formal business valuation services for a variety of transaction, financial reporting, and tax purposes, including: Financial Reporting Purchase price allocation (SFAS 141) Goodwill impairment tests (SFAS 142) Stock option expense (SFAS 123R) Analysis of long-lived assets (SFAS 144) General Business Valuations Section 409A purposes Buy/sell agreements Estate and tax planning Exit planning Equity Incentive Plans Employee Stock Ownership Plans (ESOPs) Private company equity incentive plans Transaction Opinions Litigation Support Dissenting/oppressed shareholders Lost profits and lost asset values Business interruption claims Intellectual property infringement Fairness opinions Capital adequacy opinions Page 18

19 Select M&A Transactions Page 19

20 Select Valuation Engagements Page 20

21 Business Valuation Practice Leadership Dennis Roberts, CPA*/ABV, CVA Dennis Roberts is Chairman and co-founder of The McLean Group, LLC. He has more than 35 years of accounting and investment banking experience involving a multitude of transactions across a wide variety of industries and markets. Mr. Roberts is a Certified Valuation Analyst ( CVA ) and is Accredited in Business Valuation ( ABV ) by the American Institute of Certified Public Accountants. He teaches nationally for NACVA, lectures at various MBA programs, and writes on M&A, business valuation, and corporate finance to national audiences. He is a National Association of Securities Dealers (NASD) registered representative and firm principal (Series 7, 24, 28 and 63). Andy Smith, CPA/ABV, ASA, CVA, CMA Mr. Smith is the Managing Director of The McLean Group's business valuation practice. He has a broad background of experience, including public accounting, investment banking, and financial operations management. Mr. Smith is a Certified Public Accountant ( CPA ), Accredited in Business Valuation ( ABV ), Accredited Senior Appraiser ( ASA ), Certified Valuation Analyst ( CVA ), and Certified Management Accountant ( CMA ). He is a National Association of Securities Dealers (NASD) registered representative and financial and operations principal (Series 7, 28, and 63). He has also been an instructor with the National Association of Certified Valuation Analysts. *Formerly practicing. Page 21

22 Recent Professional Recognition Top 50 CPAs in DC Area - SmartCEO Magazine recognized Andy Smith as one of the Top 50 CPA s in the Washington DC Area. SmartCEO Magazine selected the Top 50 CPA s after canvassing the magazine s readership, the Greater Washington Society of Certified Public Accountants, fellow CPAs, clients, and others. NACVA Executive Committee Dennis Roberts has served on the National Association of Certified Valuation Analysts Executive Committee. ACG Dealmaker of the Year Dennis Roberts was awarded the Associate for Corporate Growth Deal Maker of the Year. Page 22

23 Recent Articles Published The firm s valuation experts have written several articles published in various trade publications. They also regularly provide business valuation seminars to the public and often guest lecture to various schools and other groups. Page 23

24 The McLean Valuation Services Group, LLC 1660 International Drive, Suite 450 McLean, VA Business Valuation M&A Corporate Finance Page 24