Serco walks from bid for US spy firm

TALKS of a $2bn (£1.2bn) bid by outsourcing giant Serco for US spy firm SRA International were last night downplayed by the company.

The contracting firm, which runs many of Britain’s public services, had reportedly considered a takeover bid for SRA in a deal that would have propelled it to become one of the biggest foreign companies providing services to the United States government.

However, it said last night it was “not in any discussions regarding any major transaction at this time”.

The acquisition of SRA would have been Serco’s most ambitious takeover attempt to date. In 2008, it first entered the American market with a $524m takeover of US government IT services provider SI International.

The Fairfax, Virginia-based defence-consulting firm provides IT services to the US military, intelligence agencies and other clients, holding around 1,200 different contracts with the US Federal Government.

The company’s founder, Dr Ernst Volgenau, who set up the firm as the Systems Research and Applications Corporation in 1976, still retains close to a 24 per cent stake of the business.

Any sale of SRA will require Dr Volegnau to agree a price, with reports suggesting that the company is looking for a valuation upwards of 12 times its earnings before interest, taxes, depreciation and amortisation (Ebitda) this year.

For the year ending September 2010, the company had $1.67bn of revenue and $150m of Ebitda. The firm paid off outstanding loans in the last quarter of last year leaving it with no debt on its balance sheet.

Amongst its expertise is cyber security, a threat which world government’s have become increasingly concerned of.

A US government security report predicted at the end of last year that Federal investment in information security would rise to $13.3bn by 2015, indicating the potential size of the market.