Creating the Second Largest Independent Technology Integrator in Government Services
On Monday, September 10, Science Applications International Corp. and Engility Holdings Inc announced their agreement of SAIC’s acquisition of Engility in an all-stock transaction valued at $2.5 billion, creating the second largest independent technology integrator in government. The combined company will retain the SAIC name and continue to be headquartered in Reston, Virginia.
For those of us in the industry, another merger of two large companies to form a mega-contractor has become common practice to remain competitive in this difficult public-sector market. Just earlier this summer, we reported on Northrop Grumman’s acquisition of Orbital ATK, creating a fourth business sector and expanding their capabilities and expertise.
With this latest acquisition, it seems that both companies are banking on their ability to create efficiencies through scaling their enterprises. Duplicative back office and support processes will likely be streamlined to improve overall competitiveness. “These mergers are a direct result of two companies looking at their bottom lines and believing they can reduce their own internal costs by scaling up,” says Aaron Heffron, president of Market Connections. “This strategy isn’t new, but as the federal government continues to squeeze contractors, cost ends up being a key differentiator.”
However, looking forward, it will be important for SAIC to differentiate themselves on something other than price. Per Market Connections’ recent joint study with PSC and the Merritt Group, those companies that struggle to differentiate themselves on something other than price, see lower overall win rates on new opportunities in the federal marketplace.
For more details on the acquisition, see SAIC’s press release.
In this ever-increasing competitive market, more and more government contractors are looking at mergers and acquisitions to expand their capabilities and remain competitive. See how primary research can provide valuable insights.
Company Renamed Northrop Grumman Innovation Systems
For those of us in the federal market, news of mergers & acquisitions are steadily becoming the norm. Throughout all mergers, senior leadership faces new challenges to make sure that customers are well informed and satisfied, prospective business partners are clear on roles and responsibilities and the culture and employees of the new combined company are all moving the right direction.
In the news this month, the U.S. Federal Trade Commission cleared Northrop Grumman’s purchase of defense and space contractor Orbital ATK, thereby making Orbital ATK Northrop Grumman’s fourth business sector, named Northrop Grumman Innovation Systems. First announced on September 18, 2017, to make this purchase, Northrop Grumman paid $7.8 billion in cash and assumed $1.4 billion in debt.
Northrop Grumman Chairman and Chief Executive Officer, Wes Bush, said of this recent acquisition, “We welcome Orbital ATK’s talented employees. We are delighted to have them join the Northrop Grumman team, and we are very excited about the value creation our combination represents for our customers, shareholders and employees. Together, through our leading technologies and innovation-focused culture, we look forward to developing enhanced mission capabilities and more competitive offerings in critical global security domains.”
To lead this new sector, Northrop Grumman’s board of directors elected Blake Larson as corporate vice president and president of Northrop Grumman Innovation Systems. Larson previously served as the chief operating officer of Orbital ATK.
Read more about the merger in Northrop Grumman’s press release.
To learn about how research can provide key insights and inform your strategy prior to a merger and/or acquisition, visit our Mergers & Acquisitions Research page.