TRW Sets Hearty Growth, Acquisition Goals
TRW Sets Hearty Growth, Acquisition Goals By Nick Wakeman Philip Odeen With the lofty goal of doubling systems and information technology revenues over the next four years, Cleveland-based TRW Inc. is quickly blending its IT assets with those of systems integrator BDM. The melding of TRW's Systems Integrat
TRW Sets Hearty Growth, Acquisition GoalsBy Nick Wakeman
While the new unit will not be completely integrated for another year, its overall structure has been set. Plans call for the unit to be divided by customer sets, similar to the way BDM had been structured, Odeen said. The division, which will be headquartered in Fairfax, Va., has four market areas: defense, public sector, intelligence and commercial. TRW's previous structure was more along geographical lines, Odeen said. The combined company will be a formidable force in the federal market, said William Loomis, an analyst with Legg Mason Inc. in Baltimore. "They are as well positioned as anyone," he said. "There should be no real barriers to excelling." The combined capabilities of BDM and TRW position the company to be a dominant player in growing markets such as defense logistics, according to Odeen. BDM traditionally has been a strong provider with the Army and the defense agencies, while TRW has several major logistics projects with the Air Force. "So put them together, and we've got a much broader coverage of the DoD logistics marketplace and a lot more capabilities," Odeen said. The $3 billion General Services Administration contract BDM won last fall to provide telecommunications services to the government will be bolstered by the combined company's assets, Odeen said. The company is competing with five others for business under the Technical Management Support Services contract. "TRW has a lot more telecom capabilities than BDM did," he said. Outsourcing is another white-hot market the company will pursue, he said. The company is especially interested in the outsourcing of logistics services and maintenance and support of systems, Odeen said. The federal outsourcing market is expected to be more than $2.6 billion by 2002, with an annual growth rate of about 7.4 percent, according to Input, a Vienna, Va.-based market research company. Added to TRW's federal mix are the combined company's offerings in the state and local marketplace. Those markets are complementary, especially in areas such as law enforcement and health and human services. A broader base of company experience was a major reason BDM began looking for a buyer in September, Odeen said. Earlier in 1997, BDM lost a contract to a larger competitor, which Odeen declined to name, because the competitor had more references in its proposal, he said. "We thought [our proposal] was a slam dunk," he said. "When we lost, we were taken aback." The initial response was to step up its own acquisition activities to get bigger, but then in June, BDM's stock tumbled 25 percent because of problems with a state welfare system project. "That hurt our ability to make acquisitions," he said. A lower stock price also made BDM a tempting target for a takeover. "When the stock dipped, several other larger companies began to look at us," Odeen said. "We realized we were very vulnerable." BDM decided to find a buyer rather than risk an acquisition by a company that would not be a good fit, he said. TRW's overall culture, its focus on customer service and the way it treated its employees made it a good catch as a buyer, Odeen said. "I think they felt the same way about us."
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