PAE's A-T deal continues its evolution

When PAE was spun out of Lockheed Martin in 2011, it was a nice piece of business that just didn’t fit with Lockheed’s plans anymore.

In fact, it never really fit with the defense contractor, which acquired it in 2006. The idea is 2011 was to spin out PAE as an independent company, freeing Lockheed Martin from spending time, resources and attention on an ancillary business.

An independent PAE also would be free to pursue its own strategy and invest its resources where it thought it had the best chance to grow.

And invest is what PAE has done since 2011. It made an acquisition the first year away from Lockheed Martin and hit has made three in the last two years and two of those were closed in the last six months. The company has grown steadily, breaking into the Washington Technology Top 100 at No. 100 in 2012 and it is ranked No. 30 this year.

It latest acquisition was that of A-T Solutions, which closed last week. It will be tucked into the National Security Solutions that PAE created when it acquired the Global Security & Solutions business from the now defunct U.S. Investigations Services.

The two deals move PAE into new territory, bringing customers in the intelligence and special operations arena as well as bringing the company new capabilities that move closer to mission support work.

“You have the traditional PAE,” John Heller, company CEO told me, “which was good at readiness and preparedness services [for the military] training and maintenance support.”

The acquisition of A-T Solutions brings PAE more mission-oriented support work. “It puts PAE in the field supporting mission operations, counter-IED training and operations, identity management and information management. These are things that our customers need to respond to emerging threats.”

In many ways PAE is following its customers as spending shifts toward more asymmetrical threats.

“Intelligence, counterterrorism, development is what is needed today, but our customers also need to maintain that conventional force, that conventional deterrent,” Heller said. “You need the balance and these acquisitions have given us a better balance.”

An example of the balance the company is looking to bring to the market was showcased by the recent Ebola work it took on in Liberia. PAE has supported various State Department and international efforts in Liberia to stabilize and build the country’s infrastructure for nearly 20 year.

When the Ebola epidemic struck, the company was called on by USAID to setup treatment centers around the company and quickly had 1,400 people in place in just a matter of weeks, Heller said.

“Our local presence and knowledge makes us a uniquely responsive company to these kinds of unconventional requirements,” he said.

Dennis Kelly, who was CEO of A-T Solutions, is the new leader of the PAE’s National Security Solutions business and his presence in the deal was important to getting it done.

“It is essential that you assess the leadership strength. It gives you confidence in pushing forward,” Heller said.

A-T Solutions was growing under Kelly and his leadership team and “we think he can bring that leadership to our business,” he said.

Similarly, with the acquisition of the USIS Global Security business, which was led by Jeremy Wensinger, a former boss of Heller’s when they were both at Harris Corp.

“I don’t think the USIS deal gets done if I didn’t have the trust in Jeremy,” Heller said.

Once the integration of the acquisitions is completed, Wensinger will move on, likely to another company in need of a rescue. He helped stabilize GTSI before it was sold as well as keeping the USIS business viable as the rest of the company crumbled.

As PAE moves forward, acquisitions will remain part of its strategy, though Heller was hesitate to discuss what comes next.

“We can’t predict what might come but we’ll continue to build on our strength to operate around the world and respond quickly to our customer needs,” he said.

The company’s ownership – Lindsay Goldberg – is very supportive of the strategy, Heller said.

“We’ll continue to be active,” he said.