SAIC CEO shares the strategy behind Engility deal

Now that the Engility deal has closed, SAIC CEO Tony Moraco shares why he thinks this is the best move for the company's future.

Science Application International Corp. has closed its $2.5 billion deal for Engility and now the only thing it has to do is show that the deal was worth it.

For SAIC CEO Tony Moraco, the acquisition makes sense for several reasons -- capabilities, customers and financials -- but the real proof will be the company’s performance going forward.

Moraco sees Engility bringing more intelligence, space and high-performance computing capabilities to SAIC.

All three are important avenues for the company to meet the goals of its Ingenuity 2025 strategy, he said.

“We knew we had gaps in markets and capabilities,” Moraco told me. “Things lined up with Engility.”

Here are some key takeaways:

  • SAIC wanted to build its intelligence business and Engility did that in one deal rather than several.
  • Growth will be fueled by SAIC’s ability to pull new capabilities across the organization.

The deal to acquire Engility brings “critical mass” in the intelligence market, from which SAIC now has a $1 billion revenue portfolio. “This allows the account team and the line management team to have the critical mass to make investment decisions,” Moraco said. Overall, the company will have 25,000 employees and $6.5 billion in annual revenue.

When SAIC was spun out of Leidos in 2013, it had three people with clearances. The acquisition of Scitor brought a strong customer base at the National Reconnaissance Office. Engility brings a broader intelligence portfolio and 6,000 people with clearances.

“That extra 6,000 in cleared personnel is very valuable for broader pursuits inside the intelligence community,” he said.

The ability to make that move with a single deal was very attractive. The alternative would have been several smaller deals, which could have taken several years to reach the scale of Engility.

“One deal at one time with multiple dimensions was more beneficial than buying four or five companies and hoping that you can integrate them effectively,” Moraco said. “That’s why we try to buy something that is a bit more mature.”

Smaller companies often are owned by a founder or principle who leaves after the acquisition. There also can be challenges from small business set-aside work. The business base can be tough to maintain.

With larger businesses, “business systems are more mature. The employee base is more stable and you are creating more career opportunities for the seller,” Moraco said.

The size of the Engility deal means that SAIC will likely take a pause from large deals but the company is keeping an eye out for opportunities around health, cyber and analytics. “Those are areas were we still want to round out our portfolio,” he said. “But the same scale probably won’t be won’t be necessary.”


The major integration decisions including who will run what business unit and who will be responsible for what have already been made, Moraco said. “We’ve had great success in the alignment between SAIC and Engility. The staffs really leaned forward.”

Functional leaders for SAIC and Engility were paired. It helps that Engility was already managing through an account structure. SAIC also has a matrix structure that allows it to pull technical capabilities from anywhere across the company. Engility will plug into that.

“Our structure is unchanged and we see Engility lined up with that,” he said. “We are very confident we’ll hit the ground running.”

The new organizational chart has been published internally and separation notices went out before Christmas, he said.

One piece that remains to be integrated is the business pipeline. The company has used a third-party to track where the two companies were submitting bids and where overlaps may be occurring.

“In the first week, we’ll be able to decide who is taking the lead where,” Moraco said. Integrating business development will happen quickly as well.

The integration of Engility is very different from the integration of SAIC’s previous major acquisition of Scitor for $790 million.

SAIC had no intelligence work at the time, so Scitor came on and created a new business segment.

“There was less integration on operations side but it was significant on the people side,” Moraco said.

There was a significant gap in fringe benefits and created attrition and retention challenges. “It took longer to reconcile Scitor into a common fringe benefit package,” he said.

Engility employees will continue to their current benefits package through 2019 but the benefits will be harmonized with SAIC going into 2020.

“In most cases it will be neutral or favorable for Engility employees where with Scitor it was the opposite and that created some angst,” he said.


But Scitor can also be an example of how an acquisition can lay groundwork for more success. Because of SAIC’s matrix structure, they pulled capabilities from Scitor to help the company win the $620 million NASA Omnibus Multidiscipline Engineering Services II contract.

It was a combination of Scitor’s capabilities and SAIC’s IT modernization capabilities. “That was a direct synergy from Scitor,” Moraco said.

They’ve done the same thing at the Federal Aviation Administration, where in 2015 SAIC won a $425 million training contract. SAIC’s civilian sector had experience on the mission side FAA but not training. They brought that in from the Navy and Army business.

“When we connected those groups it created an opportunity to win and succeed in delivery because the matrix allowed us to have account visibility and capability visibility,” Moraco said.

As Engility comes on board, Moraco sees that as a critical indicator of success. In the short term, he expects Engility to contribute to SAIC’s growth streak of five straight quarters. But longer-term, he expects them to bid and win work that separately they couldn’t.

“The general leading indicator will be the quality of our pipeline and how we can pursue large prime intel community contracts that neither could pursue separately,” he said.

The space line of business also is expected to fuel growth because the addition of Engility makes that a roughly $1 billion dollar business as well with customers at NRO, NASA and the Air Force.

“Now we have to execute the strategy,” he said.

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