Peraton earlier this month rolled out a new structure of four sectors -- but that organization will only be temporary as the company prepares to complete another significant acquisition.
Earlier this month, Peraton and its private-equity owner Veritas Capital picked up the IT services business of Northrop Grumman and moved from its two-unit structure into four business units. Additionally, Peraton announced several new leadership roles for top Northrop executives.
In an interview with Inside Defense, Stu Shea, Peraton’s chief executive, said the company is ready to remake itself again once its planned acquisition of Perspecta is complete.
The latest addition will take the company from about $3.5 billion in annual sales to more than $7 billion.
“Now, we have four sectors that have been together for a grand total of a couple of weeks,” Shea said. “In two and a half months or so, we will close on the Perspecta transaction, and I will inherit seven new organizations.”
He said the company will work to determine the appropriate number of sectors, and “we’ll go through the same process.”
Shea said the new, much larger company will be able to bid on many more sizeable programs.
“I now swing with a much bigger stick,” he told Inside Defense. “I’m able to up my game into much larger programs. Where I might [previously have] bid on one [$1] billion-dollar-plus program in a year, I might bid on 15 of them in a year, 20 in a year.”
Shea said this focus on larger programs aligns with government trends.
“If you look at what’s happening in the marketplace today . . . there’s a great desire for the government to solve bigger problems,” he said. “You can no longer have the government contracting officer buy from a thousand different suppliers.”
“Does scale matter?” he added. “It does if you want to be in that world.”
Shea also said the anticipated flat to declining federal budget also drove the acquisitions.
“One of the reasons that we did this is to have the resiliency against those changes and to be in the more resilient submarkets,” Shea said. “I think you’re going to see some companies that are going to struggle through that because they’re a little bit too platform-centric.”
He said Perspecta Labs, which was previously Vencore Labs and whose origins trace back to Bell Labs, will become Peraton Labs. Shea said he wants to use the research and development organization to inject new capabilities across the company.
Right now, he said, that organization lives “on an island unto themselves,” but he would like to scale it and ensure its innovations are applied to the company’s work.
“If I can create that stickiness, then it has a pull and a push,” Shea said.
Additionally, he said he is not focused on immediately divesting any part of the new company.
“If there’s something that gets in conflict with something else . . . or it’s really an orphan piece of business . . . I will exit it at a future date,” Shea said. “There’s nothing on the horizon right now that I would say is an absolute divestiture.”
He acknowledged that for a private equity-owned company the size of Peraton, once both acquisitions are complete, an initial public offering is the most likely exit strategy.
“The optionality says the next logical step is an IPO,” Shea said, but noted achieving that “takes a different level of maturity in the leadership of the company.”
“What we have to do over the course of the next X number of years is to position so that we give optionality to Veritas,” he said.