Ross Wilkers

M&A

Inside Alion's journey from Navy-centric to $1.1B broad-based tech provider

Alion Science and Technology can say it is a much different company today than that of four years ago, when systems engineering and technical assistance work for the Navy was the core business.

That was true for many decades leading up to Veritas Capital’s acquisition of Alion in 2015. Step two in that transformation came in 2017 when Alion installed a new CEO in Steve Schorer, formerly an executive at DRS Technologies and the former L3 Technologies.

Which leads to the first question I always ask anytime a story of transformation comes to my attention: what kind of company did Schorer see before he joined? Keep in mind Schorer had worked with Alion while at L3 and DRS, the latter of which he ran half the business for.

“I felt the platform had scale and more importantly it had technology,” Schorer told me. “I thought I could do something with that, leverage into the market and pursue a strategy similar to what we did at DRS in building verticals of growth and capability in contemporary markets.”

Upon his arrival at Alion, that look at the contemporary market landscape led to an increased worry about the company’s heavy bent toward the lower-margin SETA work and questions over what the company could be doing instead.

“I started that dialogue as I came in to say ‘Do we need the SETA position,’ and could I trade that for EW (electronic warfare), cyber, data analytics, big data and Air Force versus so heavy on the Navy side. It’s also portfolio balance and shaping,” Schorer said.

Alion subsequently began to look outward for acquisitions, which led it to zero in on MacAulay-Brown and complete that purchase in 2018. One year after the MacB deal, Alion sold the naval systems engineering business to Serco’s U.S. subsidiary.

What does McLean, Virginia-based Alion look like now? Its roughly $1.1 billion in annual revenue breaks out to 19 percent with the Navy; 38 percent to the Air Force and 12 percent to the Army. The remaining 26 percent is spread across intelligence and classified customers, plus other non-combat defense agencies.

Schorer also pointed out Alion also expects to post 35-percent sales growth for its current fiscal year that ends Sept. 30 and sits on an almost $5.1 billion backlog, which is around 5 times revenue. Along with EW and cyber, some of Alion’s core tech areas Schorer mentioned to me include the spectrum and training solutions.

A bigger overarching theme over some of those technogy areas is Schorer’s idea of having more franchise programs. That concept translates to perhaps having fewer contracts but instead ones of larger durations and values, plus those being more profitable.

Look no further for examples than this almost $1 billion task order booked in September 2019 to support combatant commands and this nearly $900 million win added nearly a year later to help the Navy further evolve a training environment.

Schorer told me Alion previously worked with the Navy on its training environments under a handful of other contracts. In the past four years, the Navy moved to a single cyber-hardened network with software integrated throughout.

“It can bridge now to the Air Force programs, as well as the Army, but I see it as a marquee franchise for the company that has real enduring qualities and technology,” Schorer said.

Alion is looking at more acquisitions, which is natural given it is a Veritas-backed company. Though Schorer stopped short of revealing more details beyond saying smaller deals for “technically differentiated” companies are on the table.

But the backlog and hence organic growth gives Alion more than enough to work with. Plus as Schorer pointed out, even the deals that do not come to fruition are revealing.

“As you look at things, it gives you perspective on the market and capabilities in the market, and helps you shape where you want to go,” Schorer said. “You need to have a view of the market and what other companies are doing and what the potential capability is out there.

“Whether you end up buying it or not, it helps you build a perspective and relational capacity.”

Schorer’s comment on relational capacity was a natural transition to one of our other big conversation topics -- the coronavirus pandemic. Particularly both Alion, the industry it operates in and how the customers they work with are looking to get through it and keep everything moving.

A main item of concern that has to be addressed across the entire federal ecosystem is how classified programs would proceed in a world where most are working from home. That is of course not an option in many respects for those working in the cleared space.

Schorer told me one of Alion’s training customers “helped deploy hundreds of laptops to the whole team, so they could work on the unclassified side at home, and bring sprints in.”

“Those people are doing that from home in a secure compute environment on the low side, and bringing it into the lab on the high side, on an as-needed basis,” Schorer added.

In a second example Schorer offered, they rotate people in and out of the facility but the latter is also working from home. He conceded that was something “we thought we could never do.”

So how is Alion taking in everything it is learning about today’s environment with respect to the future of work after the pandemic subsides?

The study and review is ongoing of data Alion has collected, including an employee survey where many reported wanting to continue primarily working from home. Some positions will remain that way, while others will not.

But there is also a future workforce question on Alion’s mind here as well.

“We are assessing every operating group and location we have, to say as we come out of this do we change how we execute, and does that become more attractive to hire people into the company going forward,” Schorer said.

About the Author

Ross Wilkers is a senior staff writer for Washington Technology. He can be reached at rwilkers@washingtontechnology.com. Follow him on Twitter: @rosswilkers. Also connect with him on LinkedIn.

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