The Aerospace & Defense Forum San Diego Chapter October 28, 2014 Growth & Diversification A Value Imperative Larry Trammell Chairman, President & CEO, TechFlow, Inc. October 28, 2014 10/28/2014 1 Topics My Background � TechFlow � Growth � Diversification � Value � Path forward � 10/28/2014 2 1
The Aerospace & Defense Forum San Diego Chapter October 28, 2014 My background Business guy… Government contracting in aerospace, defense and services � GD � F-16 program � Started Services Company � Tracor � Aerospace � Aviation – First hyper focus on growth � � Added government contracts to commercial aviation base Project success in your rates � $8M to $8M in 2 ½ years � SAIC � R&D � Started Technology Services Company – First hyper focus on diversification � From mammals training to managing the National Cancer Institute � Zero to $4B over 18 years � TechFlow � $7M to $70M over 8 years � Story began in IT services � 10/28/2014 3 TechFlow - a story of growth Began in 1995 and grew to $7M by 2006 � � 1 government contract accounted for 90% of revenues � 33 employees in 1 location � Failed an attempt to get any significant commercial work � Founders realized they could not take the company further themselves Upon taking the lead in 2006 � � Our contract was being put out to competition for the first time � Our employees were nervous about losing their jobs 10/28/2014 4 2
The Aerospace & Defense Forum San Diego Chapter October 28, 2014 TechFlow - a story of growth Early developments � � Won first competitive, unrestricted contract for $35M � Competitors included CSC, GDIT , Unisys & others � Grew contract to $52M over 5 years � Organic growth - Won recompete of that contract for $102M � Obtained security clearance and installed business systems Mid term developments � � M&A - 4 acquisitions, all for cash � Key hires - 3 startup divisions in different business areas Long Term � � Focus on growth and value 10/28/2014 5 Growth Drivers Organic - Legacy � � New business from BD & proposals � Expand current work by being the contractor of choice Key Hires – Diversification � � Find people who are entrepreneurs and can get you into new business areas Acquisitions – Diversification � � Buy companies that satisfy your strategic growth objectives � These can provide pre-packaged diversification 10/28/2014 6 3
The Aerospace & Defense Forum San Diego Chapter October 28, 2014 Enterprise Value in Government Services Drivers of value include � � Revenue and normalized EBITDA � Whether revenue and profit is increasing or decreasing � momentum is highly valued � Contract backlog in dollars and time � Proposal backlog in dollars and time � Value of services in terms of supply and demand � high level/high value/low supply being most valuable � Special Clearances and other high-demand assets � Prime or subcontracts � prime being more valuable since there is more control � Set aside or full and open contract awards � for ability to retain contract once company is purchased by a buyer Best size company is a growing company � 10/28/2014 7 Path Forward –Vision Contractor of Choice � Partner of Choice � Employer of Choice � 10/28/2014 8 4
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