M&A activity snapshot
Federal IT services, classified mainly under NAICS 541512 (Computer Systems Design Services), is where private capital is most concentrated in government contracting. Counting direct buyouts and PE-backed platforms, private equity accounted for 44% of government IT services transactions over the five quarters to mid-2024, with diversified technology companies another 13%. KPMG's count runs higher on a different deal set: private equity drove 68% of 2024 government services transactions.
Public primes buy technical capability. CACI acquired Applied Insight, a cloud migration provider for DoD and intelligence customers, for about $314.2 million net of cash in October 2024. SAIC agreed to buy SilverEdge, a cyber and software firm, from Godspeed Capital for $205 million in cash. Earlier, Parsons bought Sealing Technologies for $204.3 million and IPKeys for $43.4 million in 2023.
Sponsor-backed add-ons continued into late 2026. DFW Capital's Bart & Associates acquired Intelligent Waves, and Blue Delta-backed ITC Federal agreed to buy Capgemini's U.S. government subsidiary. Terms of both were not disclosed. For sector-wide deal counts, see the Government Contracting & Defense Services overview.
Who is buying
Public IT services primes. CACI, SAIC, Parsons, Leidos and Booz Allen buy to add cyber, cloud, data and intelligence capability. CACI is the clearest example of scale: it reported total backlog of $32.0 billion at June 30, 2026, with 53.6% of revenue from Department of War agencies.
PE-backed IT platforms. Mid-market sponsors build platforms, then add on. Platforms named in recent deals include Bart & Associates (DFW Capital) and ITC Federal (Blue Delta Capital).
Foreign strategics with U.S. subsidiaries. Non-U.S. defense groups also buy here, through their U.S. arms. QinetiQ bought Avantus Federal from NewSpring Holdings at a $590 million enterprise value.
PE as seller. Sponsors are also the main source of supply: SilverEdge (Godspeed) and Avantus (NewSpring) were both PE-owned when sold.
What buyers look for
Mission and technology content. Cyber, cloud, data and intelligence work draws premium multiples. Labor-hour help-desk and staff augmentation work does not. The Avantus price shows the gap: 14.6x LTM EBITDA after adjusting for the tax asset, well above the 10.6x median for public government services companies at year-end 2025.
CMMC readiness. DoD's CMMC rule took effect November 10, 2025, starting a three-year phase-in. Phase 2 starts November 10, 2026, when DoD begins requiring third-party Level 2 certification for awards and for options on existing contracts. A target's certification status now affects whether its DoD backlog survives.
Vehicle position. The IT contract vehicle map is changing. GSA's Alliant 3 has no dollar ceiling and named 43 of a planned 76 awardees in its first phase. NASA's SEWP VI named 2,115 initial awardees. The NIH NITAAC vehicles, including CIO-SP3, stop taking new orders on October 29, 2026.
Cloud authorizations. For firms that host or resell cloud services to agencies, FedRAMP status matters. FedRAMP authorized 118 cloud products in FY2025 through July, a faster pace under its "20x" process. Pure labor-based integrators are less affected.
What makes a strong company
A federal IT services firm that prices at the top of the range typically has:
- Revenue concentrated in cyber, cloud, data, AI or intelligence work, not commodity help desk.
- Cleared engineers. They cost more: average total compensation for cleared professionals reached a record $126,125 in 2025, and buyers pay for that scarcity.
- A clear CMMC Level 2 plan or certification if it handles controlled unclassified information.
- Prime positions on surviving vehicles (Alliant 3, SEWP VI, GSA schedules), not backlog that depends on expiring NITAAC orders.
- A contract mix that matches its work. CACI's FY2026 revenue was 56.0% cost-plus-fee, 30.4% fixed-price and 13.6% time-and-materials, and buyers compare a target's mix and margins against benchmarks like these.
- Low concentration. CACI's top ten contracts were 22.5% of its FY2026 revenue; a small firm with one task order above that share carries recompete risk.
Valuation and deal structure
Recent primary-source multiples for pure IT services deals are scarce, because public buyers rarely disclose target EBITDA. The best-documented is QinetiQ's Avantus deal: $590 million EV, $298 million LTM revenue, $35.5 million adjusted EBITDA, and a 14.6x multiple after adjusting for the tax asset. That is a 2022 deal priced near the market peak. Avantus's EBITDA margin was about 11.9% by Axia's arithmetic ($35.5 million of EBITDA on $298 million of revenue).
Public comps set the reference range. At year-end 2025, Booz Allen traded at 11.0x CY2026 estimated EBITDA, CACI at 13.2x, Leidos at 11.3x and SAIC at 9.9x. Diversified IT peers traded lower: Accenture at 9.9x, CGI at 9.2x and ASGN at 7.4x.
Structure details that move the price:
- Tax step-ups. About $248.6 million of CACI's goodwill and intangibles from Applied Insight is tax-deductible. LLC and asset-style structures that create a deduction let buyers pay more.
- Size status. The SBA size standard for 541512 is $34.0 million, averaged over five fiscal years. A sale to a large buyer triggers recertification within 30 calendar days, so set-aside backlog is often handled through price adjustments or earnouts.
- Earnouts. These are commonly tied to recompetes or to pending awards. No public dataset tracks earnout frequency in federal IT deals, so this is a general pattern.
This is market data, not a valuation of any business. For a starting range on your own company, use the valuation tool.
Outlook
Over the next 12-24 months, compliance and vehicle access will separate IT targets more than size. CMMC Phase 2 begins November 10, 2026, and Phase 3 follows on November 10, 2027, so buyers will pay up for firms already certified and discount those that are not. The NITAAC shutdown pushes buying toward GSA and NASA vehicles. Firms that won spots on Alliant 3 or SEWP VI will have the more durable backlog.
Demand for technical capability should hold. Public primes keep buying cyber, cloud and intelligence firms, and PE platforms keep adding on. Civilian-agency IT budgets remain under pressure, so firms with defense and intelligence customers will be easier to sell.
Own a federal IT services firm and want a starting point before talking to buyers? Run the valuation tool. For how buyers build targeted pipelines in niche markets, see how PE firms build buy-side pipelines.