He joined the company in 2007 and was most recently responsible for the defense and intelligence sector of the firm’s global public sector practice.
The retired Vice Admiral served in a number of roles in his more than 30 years in the U.S. Navy including as a commanding officer of an attack squadron in Desert Storm and head of the Department’s $130 billion budget.
In his conversation with ExecutiveBiz, Crenshaw discusses his Naval career, how the government is learning to spend its money in a smarter way and why Grant Thornton is poised for growth.
ExecutiveBiz: Can you describe your position at Grant Thornton and what contracting firms and agencies you work with in your position.
Lou Crenshaw: I have two positions at Grant Thornton right now. I serve as national industry partner for the aerospace and defense segment. Grant Thornton goes to market by industry and delivers by service line. If you can think of it as a matrix organization, we have tax, audit and business advisory services and the industry focuses on how to actually market those services.
Aerospace and defense is one of those areas and I am the partner in charge of our US aerospace and defense business in terms of making sure that all of the partners and professionals that are in the aerospace and defense industry servicing those clients are up to date on the latest and greatest issues facing Defense Department.
The other part of my job is the defense and intelligence sector of our public sector work. The clients that we would see in our commercial sector are mostly Russell 2000 type clients. A typical client would be a second tier supplier to one of the major primes and could be selling just about anything to the government. There are a wide, wide variety of clients that we deal with there.
In the public sector part of the business, there’s probably not one part of the federal government that we don’t touch. I’m focused on the defense part of that.
ExecutiveBiz: What defense issues have you been focusing on lately?
Crenshaw: Well if you think about it we have over 50 offices around the country and we probably have about 40 aerospace and defense clients that are principally in the aerospace and defense industry and probably another 20 or 30 clients that have some sort of dealing, although it might now necessarily be their principal line of business.
As you can imagine, we have tax audit and advisory partners around the country and things that are intuitive to us here inside the beltway don’t necessarily make sense outside the beltway. One of the things that I try to do is make sure that all of our partners and professionals that are serving these aerospace and defense clients understand what the issues are and what the implications are to their clients.
A great example is the Deputy Secretary of Defense on just signed a memo that talks about Department of Defense planning and immediate action steps to take in the face of all the budget challenges.
I’ve turned that around, sort of translated a little bit about what he said and what would really resonate with our clients and sent that out to all of our professionals servicing those clients. Now they can go into their clients and say, “Hey, if you have any questions about what Deputy Secretary Carter just said about how they’re going to save money, here’s a quick paper that gives a summary of what’s going on.
One of the more interesting parts of my job is in the mergers and acquisitions area. Grant Thornton is a licensed and registered investment banking firm and we do a lot of work in the mergers and acquisitions area and in particular, working with private equity investors and assisting them in due diligence and providing strategic advice to them.
ExecutiveBiz: Grant Thornton reported more than nine percent jump in revenue for fiscal year 2012. What accounted for that growth?
Crenshaw: It’s an exciting time at Grant Thornton because about a year and half, two years ago, we focused on who are we and what makes Grant Thornton what it is and differentiates us in the market place.
We had always seen ourselves as a company that was dynamic and growing and we decided to focus on those companies that are just like us -– those companies that are dynamic, not satisfied with the status quo, companies that are growing.
That’s where we focused our efforts and I think it’s probably one of the principal reasons you see that jump in revenue growth because we have differentiated ourselves as a company that really has a focus. You always hear about the big four accounting firms and of course, Grant Thornton would be right up there with five or six if we did that but we’re not so much interested as being part of the big lump.
It’s hard to differentiate yourself sometimes in the big four and we really like our market position. It gives us a lot of flexibility and it gives us an ability to focus in on the areas that we want to invest our time and talent in and we choose to be number one in the markets we choose to be in.
ExecutiveBiz: Going off that, there’s obvious budget restraints in 2013, so how are you positioning aerospace and defense to succeed?
Crenshaw: There’s been a lot of uncertainty in this industry for many months now as the sequestration debate continues and debt soothing debates continue but what we’ve been telling our clients is that regardless of what the outcome of all these various debates are, the stark reality is that these are very challenging times for the government and you can expect to see spending cuts in the defense department.
I advise my clients to spend less time worrying about what’s going to happen in sequestration and what’s going to happen with the debt ceiling and what’s going to happen with continuing resolutions. And just realize that there’s not going to be as much money in the marketplace to go around and you need to begin to position yourself for that reality.
There are certain things that are actually growing in the defense industry and I have advised clients to focus on those growth areas. Those are areas in support of the special warfare area, the unmanned vehicle area and we will continue to see investments in research and development. The movement of the Department of Defense focus more to the Asia Pacific theatre and I think all those things that companies can do to take advantage of those areas of growth within the Department of Defense served them well.
That’s sort of been my mantra, expand, diversify and focus on the areas that we know are going to be growing in defense.
ExecutiveBiz: How will the budget realities, uncertainties, lack of money coming from the DOD affect M&A activities going forward?
Crenshaw: In the last quarter, I think activity was up. It’s been depressed here over the last couple of months because of some uncertainty but I do believe we still see the larger defense primes have still been positioning and spinning off certain parts of their organization and looking to buy other parts of their organization.
There has been a lot of activity in the cybersecurity realm, a lot of activity in IT and so I think we’re going to continue to see that interest. Companies will be trying to do some more spin-offs of those things that are not necessarily critical to their mission and which don’t look like they were particularly attractive in terms of growth. They’ll be trying to spin those off and they’ll be on the market looking for those areas that are in the areas where DOD is going to be expanding their spending.
All in all, it’s going to be a good year for mergers and acquisitions. We know there’s plenty of capital out there. With the interest rates what they are, it’s not going to be earning any money sitting around in the bank. I think the wise investors will be out looking for those opportunities to invest in those key growth areas within the defense department.
ExecutiveBiz: Are there any specific examples of some of your accountants, consultants coming in to a firm, giving them sound advice and them changing course and helping the company succeed?
Crenshaw: We have a fairly robust corporate advisory services group called Corporate Advisory and Restructuring Services CARS. The place where we’ve been really successful is helping our companies decide strategically where to go after companies and where not to go after companies.
A lot of due diligence goes into an investor’s decision to buy an organization and one of the things that we’ve done quite handily over the last several months is several transactions where we’ve helped in doing the due diligence and sort of understanding a bit more about what a target’s core business is and how that fits in with the defense strategy.
There have been several instances where success has been not necessarily in doing the deal but not doing the deal that we’ve uncovered certain weaknesses or areas that probably on first blush look very attractive but when considered in the strategic environment the DoD is going to be operating in, those investments turned out to be not so attractive.
Investors appreciate that. They appreciate when you’re honest and straightforward with them and sometimes, advising, “This is not probably the deal for you at this point.”
We’ve developed a lot of credibility in the market place as sort of honest broker type of person who can come in and really go the extra mile.
ExecutiveBiz: You had a 30-year Naval career where you became Vice-Admiral. In your view, how has the government contracting industry changed since you first got involved in the Navy up till now?
Crenshaw: That’s a tough question because for 32 years I was a buyer. All of a sudden, I turned around to become a seller and of course in my final job, I was in charge of the Navy’s budget for about $130 billion. And believe you me, it’s hard to spend $130 billion in usually less than a year because you don’t normally get your money right away.
The shoe is on the other foot when you try to make money. We’ve seen contraction in major hardware suppliers to the point where now there are issues of whether or not we have real competition in some of our procurement programs.
I think the other thing is that the government has become a much smarter buyer over the last, certainly over the last four or five years since I have been over on the commercial side and as a government contractor.
The focus that Deputy Secretary Carter had when he was the Under Secretary for Acquisition Technology and Logistics is he came out with this better buying power initiative. No, his successor, Frank Kendall has come out with version two of better buying power.
I think the government is just a smarter buyer and because of that you find that the quality of the bids has improved and a lot more thought going into those.
I think probably the biggest change I would see is the advantage that an incumbent had in contracts in the past is not there anymore. That has certainly tempered the way that we go about making our bids and our deliveries as well.
ExecutiveBiz: You were in charge of $130 billion at the Navy. I was wondering what are some of the issues that come along with having such a large responsibility?
Crenshaw: The span of control because when I was doing the work, I was in charge of putting together the Navy’s program and then going up on the Hill and testifying to the various committees about those budgets. The other thing that I did was the requirements for the war fighting side of the Navy, so the requirements for the surface ships, airplanes, submarines, expeditionary forces, all of that also fell under my purview.
That’s changed a little in the last year, the Navy restructured that a bit. But I think the biggest challenge that you have when you’re in one of those jobs is to really get at the facts. You become insulated and sometimes, you only hear what it is those who work for want you to hear and so you have to be smart enough to recognize that there’s usually more to the story. Be inquisitive enough to make sure that you’ve heard all sides of the issue before you make a decision.
I always said that one of the hardest jobs that I had as a flag officer was to get to the truth; what were the facts? It’s harder to get facts than you might believe sometimes because statistics can lie and people can present numbers to you in many ways and you have to be wise enough to know that there are other views of things.
ExecutiveBiz: From when you were in control of the Navy how has spending changed? What are they spending their money on more now than they were with you in charge?
Crenshaw: Well I think the Navy is focusing more now on how to get the most “bang of their buck”, if you will. By really focusing in on eliminating those programs that aren’t performing and rewarding those programs that do perform and they’re looking at new and innovative ways to purchase their goods and services and hardware.
And although some of those are called new and innovative, they’re not necessarily new and innovative to industry because they’re things that we’ve known all along: buying in quantity, buying in longer term contracts are all things that tend to reduce your cost.
But it is new and innovative in the government because it’s very difficult to obligate the government’s funds in excess of a single year because Congress doesn’t want to tie those funds up. Over the years, we’ve seen less and less discretionary spending as the military and the Navy focus in on some of the multi-year procurements and economic order quantity issues that I think have caused them to be better.
And also taking a look at the performance of the programs and demanding more performance out of the programs that they’re buying. So I think all in all, over the years, we have been able to work with the Congress and with our vendors to make sure that we’re getting the biggest bang for our buck.
There’s probably more that we can do taking advantage of some of our new enterprise resource planning systems and things like that to be an even smarter buyer and coordinating our buyers, our buys amongst the services.
ExecutiveBiz: As you transitioned from a Naval public service career to an executive at Grant Thornton, what are some of the things that you brought with you that aided you in becoming a better industry leader?
Crenshaw: Number one is a focus on the mission. Certainly in the military, we’re certainly mission oriented, that’s the thing that we focus on. One of the things that helped me when I came to the private sector was to really think about what is that I want to do, what’s my mission and help keep the folks that are working for me now focused on the current mission at hand.
I learned a lot over the years. Little sayings floating around the Pentagon which I think have served me well here. One of the ones, when I was a young commander working on the Joint Staff, General Powell was the chairman of the Joint Staff and would have some interaction with him on occasion with him as an action officer and I’ll always remember sitting at the back and marveling at some of the advice that he would give.
One that always stands out in my head was that there are no rumors in the Pentagon; sooner or later, everything comes true. And that’s something that I’ve taken with me over here. When you hear about something, if you’ve heard about it, particularly in the context of the Pentagon, it’s probably not a rumor, it’s somebody probably wanted you to know it, because they can be tightlipped when they want to be.
There’s a couple of other revelations that I had, one is remember that you need to put things in context because when I was honored to be a commanding officer of a squadron during the first Desert Storm we were flying combat missions and that tends to realign your priorities to what’s really important. I think I bring that perspective here when people are running around and there is some supposed crisis that might be in the works.
One of the first things I say now is, “Has anybody been killed?, is nuclear war imminent?” Well, no. Okay, then, it can’t be that bad. So, trying to put things in context is another good thing. Remember there are other things going on out there.
ExecutiveBiz: It sounds like you had a very interesting naval career. Would you like to touch on any moments, events or periods of time during your naval career?
Crenshaw: By far, the most rewarding tour I’ve ever had was as a commanding officer of an attack squadron during Desert Storm where you actually are in combat and you get to see everybody at their best and not only their best but their true self.
It was certainly an honor to lead that squadron when we went into combat particularly in the early days of the first Desert Storm when we weren’t quite sure exactly what the outcome was going to be.
I learned a lot about that. I learned a lot about perspective and I learned a lot about judging people. Many of the people who I thought were going to be real killers at the beginning of the war turned out to be not quite so and some of the officers that I had who I thought were not exactly the best officers in the world turned out to be very dependable, really good. It changed my whole perspective on how I viewed and judged people as a result of that.
I’m taking that with me, hopefully, it’s done in context but it was certainly a life-changing event for me so now, whenever I go home or leave home in the mornings and give the lovely Mrs. Crenshaw a peck on the cheek and tell her I love her, I really mean it.
It’s not pro-forma because you realize it might be the last time you ever get to say it so you’d better mean it.
ExecutiveBiz: As you move forward and 2013 begins, what are you most excited for?
Crenshaw: As you noted earlier, we had a jump in revenue in ’12 and I’m excited about continuing that momentum and helping other people and other companies grow in challenging times.
It’s not impossible and I think there are a lot of things that we can do both strategically and operationally with our clients to have them positioned for what opportunities lie ahead.
No doubt, there’s challenges but that’s why we are where we are. We have to help people meet those challenges and the boss that I used to have here at Grant Thornton who retired last year always had a great saying which was “We run towards problems, not away from them,” and I think that 2013 certainly gives us plenty of opportunity to run towards problems. I don’t see anything worthy of running away from.