This year has been quite eventful for Stu Shea. As CEO of the government technology firm, Peraton, Shea has overseen two business acquisitions in less than six months. In February, Peraton absorbed Northrop Grumman’s IT services business, and last month, private equity firm Veritas Capital acquired Perspecta and combined the company with Peraton. Through these acquisitions, Shea has grown Peraton’s business by an incredible seven-fold.

On June 8, 2021, Shea joined ACG National Capital as a special guest speaker for the chapter’s June Monthly Meeting, where he shared insights on the lessons learned from recent transactions, and gave a behind-the-scenes look at the decision- and deal-making processes that took place in the boardroom. Michael H. Lustbader, Managing Partner of Arlington Capital Partners, moderated the discussion.

Stu Shea, CEO of Peraton

Lustbader opened the meeting by asking Shea how the recent acquisitions fit into Peraton’s overall growth strategy and what they mean for the company’s future. Shea explained that when Peraton was first stood up in 2017, it was a divestiture from Harris Corporation. Peraton was comprised of—as Shea describes—his “little island of misfits,” Harris’ leftover businesses from its antecedent organizations. At the time, Peraton was focused on being a mission capability integrator.

As Peraton evaluated the direction national security was heading, the company began forming a view that national security reached far beyond the defense industry and intelligence community. Shea cited 2020 as a prime example of how national security also encompasses health, election, border, cyber, and financial security. As this view began to take shape, Peraton began looking into doing a series of acquisitions and developments that would boost their positioning across those additional sectors.

When the opportunity arose to acquire the federal IT and mission support services business of Northrop Grumman, Shea said Peraton immediately jumped on it. The acquisition fully complemented Peraton’s broader vision of national security and gave the company extensive DevSecOps, health, and financial risk assessment capabilities. Fifty-one days later, Peraton consummated an acquisition deal with Perspecta, propelling Peraton towards its goal of becoming a next-generation national security company.

When Lustbader inquired about the behind-the-scenes of the decision- and deal-making processes, Shea described them as very “interesting.”

Shea explained, “You see the deals. They happen, and sometimes you push them and get out in front of them. Sometimes they are just happening around you pretty quickly. You have to be opportunistic to jump on them.”

During the board room conversations leading up to the Northrop Grumman deal, Shea placed major emphasis on Peraton’s need to strategically position itself within resilient marketplaces where there would be potential growth. He also explained that it was crucial that these markets have the ability to mitigate potential downsides that may occur from the change in White House administrations.

Through the Northrop Grumman acquisition, Peraton mainly added contracts and people, rather than having to build out new infrastructures. Shea described the acquisition as more of an “additional accretive element.”

As for the Perspecta acquisition, adding the publicly traded company presented Peraton with a plethora of new capabilities, especially due to its size and scale. And when the “marriage of three” came together, Shea said it was a product of strategy and opportunity coming to a nexus.

Lustbader pointed out that Shea has had experience with large, publicly traded businesses and businesses that are backed by private equity. When asked to compare the two, Shea explained that both have their advantages and disadvantages.

In publicly traded businesses, focus is honed in on reporting and making sure that cash flow is predictable on a quarterly basis. The financial elements are under a disciplined structure, which can sometimes be in conflict with a businesses’ strategic elements.

For private equity backed businesses, Shea explained that there’s a longer-term view of the world, equating it to a marathon rather than a sprint. Shea admitted that he prefers the more disciplined, strategic rhythm of private equity over the publicly traded style of “anxiety ridden financial review.”

When asked how the overall integration process is going, Shea split up the process into “things” and “people” components.

The “things” component is comprised of ensuring that systems, tools, and processes are effectively and efficiently integrated. Shea explained that when Peraton was first stood up, the company hired employees who had been through acquisition processes.

Prior to the Northrop Grumman and Perspecta acquisitions, Peraton had facilitated two integrations already. During that time, Peraton brought in outside advisors for the business, financial, and strategic integrations. Through those experiences, Peraton had an existing playbook on how to tackle the “things” head-on going into 2021.

The “people” integration is trickier, according to Shea. He explained that it is difficult to organically integrate different business cultures. To remedy this, leadership laid out a plan for how they were going to organize, then allowed employees to give their input. Peraton then began to integrate staff based on the collective employee responses it received.

Lustbader also asked how Peraton navigated the COVID-19 pandemic, especially when facilitating acquisitions. Shea explained that Peraton shut down their facilities quickly when the pandemic hit, and it transitioned employees to a distributed workforce. With the exception of classified projects, all work could be done off campus.

Shea praised his workforce for its performance throughout the pandemic. “We trusted our people to deliver and they did,” said Shea. “And they were overwhelmingly happy with it. They delivered. Cash flow was improved. Everything was improved!”  

He explained that the integration processes continued remotely through Zoom calls, without any major interruptions.

The one downside he did mention was not being able to see Peraton’s customers face to face. “A lot of my focus now is going to be getting back out and meeting with our customers and to go visit our locations,” said Shea. One major lesson he did learn through COVID-19 is that Peraton is “well poised to operate in whatever the world throws at us.”