Serco-Alion deal: A tale of two transformations

Serco's planned acquisition of Alion's Navy business unit says a lot about where both of these companies see their future.

Serco Group’s North American business transformed itself 11 years ago when it acquired SI International to pursue larger opportunities in the U.S. government services market by adding more capacity and resources.

Fast forward to Thursday, and Serco Inc. has once again moved the needle on scale in the announcement of its $225 million acquisition of Alion Science & Technology Corp.’s naval systems unit.

WT POWER TRAINING

Mastering Stakeholder Engagement

We have joined with MBDi to offer a one-day course on Mastering Stakeholder Engagement as a way to foster closer relationships and win more business.

DATE: June 7

WHERE: Valo Park, McLean, VA

Click here for more info.

Like in so many other transactions, there are two sides of the transformation story in this case. This is Serco Inc.’s largest acquisition since the SI deal and doubles the size of its Navy portfolio. It also tells a story of what the U.K-based Serco Group parent might be thinking.

“With the ‘Brexit’ dynamic going on in the U.K., they have clearly made a strategic decision to expand their business base outside of the U.K. and have targeted the growth dynamics of the U.S. defense business,” said Greg Van Beuren, a managing director in Houilhan Lokey’s aerospace, defense and government market practice.

Houlihan Lokey advised Alion on the transaction. In a phone interview with me Thursday, Van Beuren said both Serco and Alion are looking at this deal through the lens of focused scale that has driven much of the government market’s dealmaking activity in recent years.

For Serco’s part, the “Inc.” business grows from 20 percent of the overall Group’s revenue to 26 percent with the addition of Alion’s NSBU unit. The transaction also gives Serco a substantial ship design business amid the Navy’s plan to grow its fleet size from 280 to 355 ships both through new vessels and extensions of current ones.

Serco’s deal for this Alion business mirrors the move CACI International made last summer to acquire the Navy systems engineering and ship design business of CSRA. GD inherited that business through the acquisition of CSRA. GD sold that business to avert an organizational conflict of interest with the defense giant’s shipbuilding segments.

Alion declined comment for this story, but they likely did the deal to avoid a similar OCI when systems engineering and technical assistance, or “SETA” work, comes into play.

“There are companies at a very high level that eventually need to pick a swim lane: are you on the development side of the equation or are you on the SETA side of the equation,” Van Beuren said.

Aside from a potential OCI, the sale also is another step in the transformation of Alion, which acquired defense technology integrator MacAulay-Brown in August of last year.

That deal gave Alion more of a footprint in higher-end domains like electronic warfare, artificial intelligence and others in the “ISR” domain -- intelligence, surveillance and reconnaissance.

Alion broke the $1 billion-pro forma revenue threshold at the time with MacB tow and the sale of the “NSBU” unit will see almost a third of expected sales now go to Serco Inc.

That is a significant haircut for Alion on the top line and also sees essentially the entirety of its legacy business headed to another owner. But just like in Serco’s case, Van Beuren said this divestiture moves Alion further in its push for the type of focused scale that the market is placing more of a premium on.

“It focuses Alion more on the development side of the business in a particular area around ISR that could be very attractive to the large primes that may not have otherwise been able to look at Alion in the future,” he said. “You’re essentially expanding the buyer universe for a business that otherwise might have had limited that universe in the future because of the diversity of the business they have.”

Expect others to make similar moves in the pursuit of focused scale, Van Beuren added.

“As a result of some of these larger acquisitions, there are more than likely going to be businesses that don’t fit with the overall strategy of the acquirer, and so I think we will continue to see additional corporate divestitures,” he said.

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.