Mike Alber on Engility’s 2014 Acquisition Moves and How Companies Should Tackle IPOs

alber_mike_smallIn his role of chief financial officer at Engility, Mike Alber was one of the leaders that spearheaded the Chantilly, Va.-based services contractor’s $11.50-per-share purchase of Dynamics Research Corp. and pending $1.1 billion acquisition of TASC.

As covered on GovCon Wire in December, the Federal Trade Commission has cleared the TASC buy and Engility expects the deal to close during the first quarter of calendar year 2015.

In this conversation with ExecutiveBiz, Alber summarizes why Engility moved to buy DRC and TASC, offers a forecast for the GovCon services market in 2015 and offers advice on how companies should approach initial public offerings.

 

ExecutiveBiz: What new lines of business did Engility eye with the DRC and TASC acquisitions?

Mike Alber: First let me say that these two acquisitions are part of the growth strategy we have had at Engility since we spun from L-3 in 2012. With the acquisition of DRC and pending acquisition of TASC, we strengthened our customer footprint in two important markets: federal/civilian and the intelligence community. These two transactions will make us a stronger company and will allow us to offer our customers a more comprehensive suite of high-quality offerings to meet their evolving mission and affordability requirements.

Both acquisitions also help us focus more on specialized technical consulting and the higher end services, which is the strategic direction we have charted for this company since Day One. Scale is critical to a services business because it gives us the ability to spread fixed infrastructure costs across a much larger base and that tends to make Engility much more competitive from a rate perspective. Both DRC and TASC acquisitions added scale to the business.

 

ExecutiveBiz: How do you see the government services market shaping itself this year?

Mike Alber: Over the next year, I expect the government services market to begin to stabilize and reach a level of greater predictability and consistency. For pure play government services companies like Engility, this predictability can bring important stability to the market place — for us and for our customers.

Our business model was built to compete in this constrained budget environment, which I think we will be in for quite some time, even as there is discussion these days on Capitol Hill and parts of the administration that defense and intell spending need to be maintained at current levels and even increased.

Predictability helps our customers because they know their budgets and can move forward with procurements that they need to put into place. They can also lock in savings from contractors like Engility that provide high-quality services in the most cost-effective manner.

In 2013-2014 we saw a paralysis in which customers were just extending contracts rather than recompeting them, and in those kinds of situations, the customers are not getting the benefit that they could get with lower-priced contracts. We believe that with predictability, the emphasis will be on getting great service in a cost-effective manner.

 

ExecutiveBiz: What’s another trend that you are looking forward to in 2015?

Mike Alber: The headlines show that the world is still a very dangerous place. We saw the market begin to pull back from defense and aerospace stocks earlier this year, but it is in nobody’s best interest to adopt a soft position with regards to defense or intel. There are still critical missions out there that need to be supported and hard problems that need to be solved. Our customers will be looking for companies like Engility that have the ability to support their missions in these areas and bring about cost-effective solutions in the future.

 

ExecutiveBiz: What led you to be part of the creation of Engility more than two years ago?

Mike Alber: The ability to come to a company, spin out a piece of work and take it public is truly a once-in-a-lifetime opportunity that I didn’t want to miss. One can count on one hand the number of folks that can say they have had that kind of experience. So when it was presented to me in 2012, I knew that it was going to be challenging from a work perspective but it was life-altering opportunity to bring a company with a 40-year legacy and great portfolio public.

I am incredibly proud of what we did with Engility: financed the company, took it public, listed it on Wall Street and then made two major acquisitions in a 3-year time period. We have an expression that we frequently say that “We’ve been sprinting a marathon” feels real. I’ve only had one opportunity to ring the bell at Wall Street and I am really glad I had it.

 

ExecutiveBiz: What is the most important thing that a CFO should focus on when an IPO is happening?

Mike Alber: Making sure you have the right leadership team in place with people you can trust and count on. Without a well-seasoned and focused team some of those details are going to fall through the cracks We were very fortunate that Tony selected great people in all the critical positions. We had to do an incredible amount of work but having an experienced team made it a lot easier to get through all these hurdles.

With the DRC transaction we have demonstrated that we can skillfully develop and execute integration strategies that drive meaningful growth and the leadership team is looking forward to a repeat performance with TASC.

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