Accel-KKR adds to government IT portfolio

Accel-KKR has acquired Covansys’ state and local government practice for $40 million in an add-on deal for its Saber portfolio company.

Covansys Corporation, a Michigan-based consulting and technology services company, said today it will sell its state and local government practice for up to $40 million (€34.5 million) in cash to privately held software and services company Saber Consulting.

Saber is a portfolio company of Accel-KKR, a technology-focused private equity firm. Accel-KKR invested in Saber in January with the intention of adding on to the company.

The Covansys state and local government practice provides software and services to  government entities around the country, and has central operations in Columbus, Ohio. The business has 350 employees and generated approximately $75 million in revenues during the 2005 fiscal year.

Accel-KKR Vice President Jason Klein said the company plans to merge the former Covansys operations into Saber to create a large national service provider under the Saber brand. Klein said the market for providing technology services to state and local governments is highly fragmented now, with most companies operating locally.

“We believe there’s significant opportunity there [for a national company],” Klein said. “There are a lot of companies that we’ve looked at in this area.”

“In a lot of these systems we’re seeing major upgrade cycles for software services,” he continued. “That cycle is occurring right now, and companies like Saber are in a great place to take advantage of that.”

The new Saber will have customers across 46 states, over 500 employees, and product and service offerings in elections management, voter registration, health and human services, pension administration, motor vehicles, public health and digital document management.

Klein added that the only area of overlap for the two companies is in elections management, however the two focus on different states in that sector. He said the new Saber will be one of the largest national public sector technology businesses in the country.

A spokesperson for Covansys said the transaction will allow the company to focus more fully on its global outsourcing business. Covansys is retaining its federal government services practices and PDA Software Services, a company Covansys acquired in 2002.

Founded in 1985, Covansys was one of the first US-based IT services companies to establish offshore facilities in India and today the company owns three development centres in that country.