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Navigating Enterprise TransformationGovernment Contracting Webinar SeriesAugust 28, 2019
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TODAY’S AGENDA Enterprise Transformation – What is it?
GOVCON Market M&A and Transformation Trends
Navigating Challenges & Pitfalls
Best Practices
Q&A
Kim Clark Pakstys
PRESENTER
Brenda SleeperBrenda Sleeper
3
Review trends that Government Contractors are employing to survive and thrive in this everchanging and increasingly competitive environment.
Identify common pitfalls of integration.
Discover strategies to help navigate change and harmonize people, processes and cultures.
Understand the implications of organization capacity and culture on transformation initiatives.
LEARNING OBJECTIVE
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WHAT IS ENTERPRISE TRANSFORMATION?
Fundamental change that impacts the way an organization operates – realigns resources –people, processes and systems with a new strategy and/or business model
Intentional leadership effort to drive synergies and efficiencies between and across the business – creating a unified enterprise approach
Separate Operations
Align and Harmonize People, Processes
and Systems Unified
Enterprise
5
MARKET TRENDS
2.8
3.5
3.6
4.7
5.6
5.6
6.3
6.5
6.7
7.3
CACI
SAIC
Perspecta
BAH
Raytheon
Boeing
Lockeheed
Northrop
General Dynamics
Leidos
0 2 4 6 8
2019
2.5
3.1
3.4
3.5
3.6
4.1
4.6
5
6.4
11.6
SAIC
CACI
BAH
HP Enterprise
Raytheon
General Dynamics
CSRA
Boeing
Northrop
Lockheed
0 5 10 15
2016#1#4 & 8#58/yr$6.5B/yr#25
not in Top 10 3 Years Ago
do not exist
deals on avg since 2015
total value
publicly traded A&D / GovCon
Source: Washington Technology Top 100
6
INDUSTRY EVOLUTION THROUGH CONSOLIDATION
Merger: the combination of two companies into a single legal entity- Raytheon-UTC merger (2019)- L-3-Harris (2019)
Acquisition: corporation transaction where one company purchases a portion or all of another company’s shares or assets- IBM acquisition of Red Hat (2019)- Leidos acquires Lockheed Martin IT unit (2019)
Consolidation/Realignment: the combination of several business units or several different companies into a larger organization- Leonardo DRS
Divestiture/Spin-off: selling of, or disposal of, a firm’s assets to achieve a desired objective, such as greater liquidity or reduced debt burden- United Technologies splitting into 3 companies (2018)- CSC PS + SRA = CSRA (2018)
Reverse Morris Trust: reorganization that allows an entity to combine a subsidiary that was spun off with a strategic merger or combination with another company free of taxes, provided that all legal requirements for spin-off are met- Perspecta (2018)
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WHAT IS DRIVING TRANSFORMATION?
Entity
Transaction
Transformation
• Capabilities• Margin & Revenue• Customers • Market Access• Technology• Talent• Valuation
8
LESSONS FROM THE FIELD
Economic Drivers
New Funding Sources
New Capital Sources
The GovCon landscape has evolved in the past 3 years and continues to both consolidate and provide opportunity for new contractors changing the driver and culture of many traditional contractors.
STRUCTUREBUSINESS MODEL
CULTURE
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IDENTIFYING AND NAVIGATING COMMON PITFALLS
Resistance
Lack of Clear Vision
Culture
Bandwidth
External Factors
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STRATEGIES FOR SUCCESSFUL ENTERPRISE TRANSFORMATION
M&A/PMILeadership
Team SelectionCommunication
Alignment
CONSOLIDATIONClarity of Purpose
Mission FocusDecision MakingCommunication
Culture
TRANSFORMATIONLeadership
Clear Driver of ChangeConsistent Message
Team SelectionChange Management
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BEST PRACTICES FOR THRIVING DURING CHANGE
Recent research findings state, and our experience confirms, mergers and acquisitions and large scale change initiatives fail when organization alignment, culture and human capital are not given proper attention.
Winners in the change game, pay special attention to the following integration factors . Pace / Cadence
Culture
Tailored Approach
Value Creation – Short and Long Term
Planning, Resourcing and Monitoring
Execution
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Government Contractors are acquiring and implementing transformative initiatives to thrive in this everchanging and increasingly competitive environment.
Identifying leadership, pace and culture differences are key strategies for aligning and harmonizing people, processes and cultures.
Understanding the scope of the changes required, involving stakeholders, engaging champions and deploying sufficient resources are critical to the success of any transformation initiative.
SUMMARY
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QUESTIONS?
QUESTIONS?