LMI builds for the future with private investors

LMI knew exactly what it wanted when the nearly six-decade-old state-owned consulting firm began looking for an investor to buy its for-profit subsidiary.

The acquirer is actually this consortium of investment intermediaries:

  • Declaration Partners, backed by the family office of Carlyle Group co-founder David Rubenstein
  • Capitol Meridian Partners, founded by Carlisle alumni Adam Palmer and Brooke Coburn
  • 22C Capital

Terms of the deal were not disclosed, but all parties expect it to close in the third quarter.

LMI CEO Doug Wagoner explained to me what they look for in an investor: Preserving the workplace culture, being involved for the long term and understanding the government services market.

When I asked Wagoner about the plan to tell LMI employees what’s going on, he said the senior leadership team spent the same amount of time or more deciding how to talk about what won’t change for the workforce.

The same concept applied to employee town halls to tell them about the transaction and field any staff questions.

“I actually joked that the person going through the most changes is me because I’m the only one getting a new boss,” Wagoner said. “I told everyone else, ‘You have the same boss, you have the same client, the same benefits (and) pay.’

For context: Wagoner joined LMI as CEO two years ago during a period of change after change. One of his priorities was to reiterate that the strategy laid out by the board of directors will continue as it is.

What is changing now? The for-profit business will retain the LMI name and substantially all of its 2,000-plus employees. The nonprofit organization has been rebranded the NobleReach Foundation and is governed by LMI’s current board of directors.

Headquartered in Tysons, Virginia, LMI was originally founded in 1961 as a federally funded research and development center specializing in helping the government solve logistics problems.

Data analytics and management consulting are the other two main lines of business at LMI and will remain so after the transaction, Wagoner said.

LMI could likely reach its goal of $750 million in annual revenue by 2025 on the firm’s current path, Wagoner said.

The firm reported $419 million in revenue in 2021, up from $397 million in 2020, which included a mix of organic growth and acquisitions like last year’s purchase of Suntiva to add more work in public health and defense.

But accelerating digital transformation trends are driving LMI to not only deliver its solutions faster, but also to put more of them in the hands of government customers.

“We have great ability, great past performance that we want to use now,” Wagoner said. “We want to use it faster than the usual RFP (request for proposals) process.”

The other type of process that is becoming less desirable in government is one where teams get together, brainstorm ideas, experiment, put the findings and ideal next steps into a white paper, send it to the agency, and wait for the client’s direction.

“By the time you actually deliver something, you’ve lost that technological advantage against our adversaries,” Wagoner said. “Using our knowledge of the mission, we can see and anticipate what challenges they have, develop prototypes and have iterative development with them. It’s been very successful for us, we want to accelerate that and that’s what this capital will do.”

Having this additional outside investment is not only to work on growing LMI’s current business portfolio, but also to identify opportunities to acquire other companies that add new customers and service offerings.

Wagoner identified data analytics, artificial intelligence and cybersecurity as technology areas of interest for potential acquisitions. A greater presence in intelligence agencies is on the list for adding new clients, along with how space and logistics can go together.

That means the $750 million revenue target could become a different figure as LMI moves on its strategy.

“We want to accelerate to 750 and go beyond that and really become a top 20-top 25 provider in government services,” he said.

KippsDeSanto & Co. is acting as lead financial advisor to LMI, while Macquarie acts in the same capacity for the investment consortium. Latham & Watkins, Sidley Austin and Paul Weiss advised the investors on legal and other matters related to the transaction.

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