Cambridge, Massachusetts-based private equity firm General Catalyst Partners and Palo Alto, California-based venture capital firm Accel Partners announced are taking equal stakes in BBNT Solutions from US telecommunications giant Verizon.
Terms of the deal were not disclosed. BBNT management is also taking a significant share in the company, according to Catalyst managing director David Fialkow.
The sale by Verizon is part of the company’s strategy to divest assets not directly related to the company’s core strategy. Verizon inherited the company from GTE’s portfolio as part of the GTE-Bell Atlantic merger that created Verizon in 2000.
BBNT was founded in 1948 by two MIT professors as a small acoustical consulting firm. The company grew into various other fields, and created ARPANET, the forerunner of today’s Internet, in 1969. BBNT is credited for the first implementation of packet switching, the first router and the first network e-mail, which established the “@” sign as an e-mail address icon. BBNT today offers its services to both government and commercial customers.
“We think the core BBNT business, which is the government contracting business, is extremely profitable and robust,” Fialkow said. “As we move into limited IT spending in various sectors, the IT spending in federal government areas – in particular the defense-related intelligence area – is increasing two- to three-fold, as opposed to traditional IT spending in terms of growth rates.”
Fialkow said that its developments in signal processing, network security, speech recognition and mobile networks have given BBNT commercial strength as demand for those services are increasing. In addition, he expressed confidence in the company’s management team, which has produced great results in a recently choppy market.
The deal is also the first collaboration between General Catalyst and Accel. Fialkow said the partnership will prove advantageous because Accel has “a great track record in building technology companies.” Also, Fialkow said the East Coast and West Coast presence will help BBNT expand its services.
General Catalyst Partners was founded in 2000 and usually partners with entrepreneurs and technical founders to invest in software and technology platform companies.
Accel, founded in 1983, currently manages more than $3 billion in capital. The firm partners with strong management teams in Internet, software and communications companies. Some of its noteworthy investments include Macromedia, RealNetworks and Veritas.