The not-so-hostile takeover of Robbins Gioia
It sounds like a script for a business-themed movie:
CEO launches a risky transformation of a struggling company with a rich and respected legacy. Board gets nervous and fires him.
Fired CEO still believes and goes out and gets the money, buys the company and returns as CEO.
But this is no movie script. It happened in reality at Robbins Gioia over the last several months.
Brad King was fired as CEO in August after the company’s board got nervous about his strategy. In 2015, he had launched a repositioning move for Robbins Gioia that included no bids on anything while the company focused on capture activities for new contracts that fit a new focus on higher-value services work around legacy system modernization, enterprise architecture and business analysis.
The company also is expanding its offerings around its proprietary software for scheduling complex processes.
“We had to pivot away from staff augmentation work,” King told me.
The process of moving to this new work would take 18-24 months. "The board got fidgety" after 16 months, he said.
When he was fired, the rest of the management team was surprised. “It wasn’t well received,” King said.
But he still believed in the strategy they had put together. He also knew the company was heavily in debt and wasn't able to service that debt for a few years.
Informa plc, which acquired Robbins Gioia in 2005, sold the company to a group of investors led by Jim Leto in 2012. Leto formed a holding company called RG Holdings that owned the shares in Robbins Gioia. Those shares were the collateral on the debt that continued to be held by Informa.
But Informa remained very hands off and Robbins Gioia had stopped servicing the debt as it tried different things to turn the company around.
King, who joined the company, as part of Leto’s team in 2012, went to Informa and over several months negotiated a deal to acquire the collateral on the debt. To do that, Informa had to formally foreclose on RG Holdings.
King told me some people called it a “hostile takeover of a private company, but there was nothing hostile about it.”
The deal closed on Feb. 2 and King became once again CEO of Robbins Gioia.
But the story doesn’t end there.
To pull off this rare kind of deal, King created a company called RG5. The RG, obviously, stands for Robbins Gioia. The 5 is for King and four other senior managers that he wanted as his partners.
But because they were still employees of the company and had a fiduciary responsibility to RG Holdings, he couldn’t tell them anything until the deal was signed.
“From the beginning, I wanted them to be part of the opportunity,” King said.
Once the deal closed, he brought them and said he wanted them to be part of the new company and they all said yes and made individual investments as founders. The group is the majority shareholder in the company.
“It really is a management buyout but management just couldn’t know about it,” King said.
The five-person leadership team also includes:
- Andrew Robinson, president
- Lorie Moody, executive vice president, contracts
- Ben Harrison, chief financial officer
- Rick “A to Z” Agopsowicz, chief strategy officer
There is a sixth investor, Dendy Young, former GTSI CEO and founder of McLean Capital. McLean Capital also helped with financing the purchase. Terms of the deal were not disclosed.
Robinson had been hired by King and when King was fired, Robinson was tapped as the new CEO.
“We very amicably divided duties,” King said.
When he returned as CEO, King said he was happy to see that the strategy he had put in place was still being executed by the management team he left behind.
In fact, the solicitation for one of the first programs they targeted was released in January and the company has submitted its bid. A decision is expected in June. It now has $50 million in its bid pipeline and within a few months there should be $200 million in the pipeline.
As part of the turnaround, the company will update its brand and drop the full Robbins Gioia name for the simpler RG. It also plans to launch a simpler domain name for its website and email. Spelling Gioia has often been a struggle. “There are too many vowels,” King said.
The success of the company will depend on how well it continues to execute its strategy.
“We want to build on our program management legacy, especially around legacy modernization,” he said.
Other capabilities include technology transfer, production planning and control, and IT management. Enterprise architecture and business analysis capabilities run through much of what the company offers, King said.
It also wants to build on its scheduling software that are used heavily by the Air Force and Navy for maintenance and planning. For example, submarine maintenance is extremely complex and has to be done in a constrained place.
King estimated 100,000 people probably use the software each day.
That software is what kept the company going while it was not bidding on work to focus on capture activities, King said.
“We had a good solid base of business on the books that carried us through,” he said. “Our proprietary software suite of scheduling tools also allowed us to get some sole source contracts.”
Robbins Gioia also had shrunk its head count from a peak of 700 down to about 200. The company had $30 million in 2016 revenue and King said he expects the company’s run-rate to be at $35 million-$40 million by the end of 2017.
The company had been struggling for several years as the market changed. The government was relying more on small businesses for the staff augmentation work Robbins Gioia had been built around. The government also was taking more of the company’s work in-house, he said.
King joined the company in 2012 to run its federal business. In 2013, he became CEO.
“My first job was to cut costs out of the company and right the ship,” he said. To do that, Robbins Gioia became more efficient. “We tried to be smarter, faster, better at what we did.”
But after a year, “we realized we were just chasing the market to the bottom,” King said.
That’s what launched the no bid period and the shift to capture activities as a way to reposition.
The focus is still on continuing capture activities and building the pipeline but contract wins should start to flow this summer, King said.
“We really hope this is just the first paragraph in a new story,” he said.
Time will tell if there is a Hollywood ending in their future.
Posted by Nick Wakeman on May 03, 2017 at 1:58 PM