The S.C. Research Authority is selling its government-contracting arm in a deal worth as much as $40 million, amid an effort to hone the state-chartered agency’s focus.
Virginia-based Analytic Services Inc., a nonprofit research institute, will pay $25 million for Advanced Technology International, which has its offices in Summerville. It could pay another $15 million over the next four years if ATI hits growth targets.
The sale, which is expected to close Tuesday, is among the most concrete steps SCRA has taken in recent months to narrow its focus.
The deal comes just six months after the Research Authority moved to split from ATI and make it a freestanding organization. That was in response to concerns that it was distracting from the economic-development agency’s mandate to grow South Carolina’s technology sector.
SCRA director Bob Quinn says the agency will invest the sale's proceeds to help underwrite its work in other areas. Its affiliate, S.C. Launch, will also retain equity that ATI owned in five South Carolina companies, representing $11 million of investments.
ATI was initially created in 1998 to keep SCRA self-sustaining, and it’s done so by winning several big contracts with the military. It essentially puts together groups of researchers, who study everything from shipbuilding to the electromagnetic spectrum, and it takes a fee for managing their work.
But SCRA’s board decided in July that the contracting work didn’t line up with the agency’s mission to give the state's researchers and tech entrepreneurs a leg up. The Research Authority was founded in 1983 to run research parks around the state, and it began investing in startups in 2006, inking hundreds of deals since.
The decision to spin off ATI as a separate organization got the attention of a handful of prospective buyers, Quinn said, and the agency heard from three interested in making an offer. It later hired The McLean Group, a Virginia consultancy, to seek out purchasers.
"That was certainly not our intention at the time of separation, but it was not prudent for us to simply ignore the expressions of interest," Quinn said.
Falls Church, Va.-based Analytic Services, which also goes by ANSER, says it will keep all 165 employees it is picking up in the deal in Summerville.
And it says it hopes to blend ATI’s contract management focus with the consulting and analysis work it does for the government. Both primarily work with the military.
"This acquisition gives us greater visibility of important defense technology developments across the country," Analytic Services CEO Carmen Spencer said in a statement. "That knowledge will enable us to better advise our government clients about the range of solutions at their disposal, thereby enhancing the value we deliver."
ATI was set to cover $4.5 million of SCRA’s budget this year, and while Analytic Services will pay out the rest, the sale means that SCRA will need to find a new source of funding to cover its budget later on.
Quinn said he plans to ask the state legislature for more funding to grow its programs. The agency gets $6 million a year from individual taxpayers, who get a dollar-for-dollar tax credit in return.
SCRA says it will ask lawmakers to let it take in $12 million a year, but a bill that would increase its funding hasn’t yet been filed.