Peraton chief coordinates massive integration
Stu Shea, chairman, president and CEO of Herndon-based national security contractor Peraton Inc., is overseeing the integration of two recently acquired businesses that marked some of Virginia’s most significant business deals in 2021.
Shea has been included in both editions of Virginia Business’ annual Virginia 500 issue, a compilation of the state’s 500 most powerful and influential leaders in business, government and higher education. The 2021 edition was published in September.
Earlier this year, Peraton completed both the $7.1 billion purchase of Chantilly federal IT contractor Perspecta Inc. and the $3.4 billion acquisition of Northrop Grumman Corp.’s federal IT and mission support services business, with the backing of Peraton parent company Veritas Capital, a New York-based private equity firm.
Shea says the integration of two longstanding companies with different cultures into Peraton, which was created in 2017 after Veritas purchased then-122-year-old Harris Corp. Government Services, has been a challenge — especially amid a worldwide pandemic. He anticipates that Peraton’s workforce of 22,000 will remain steady and ultimately grow over time. In July, the company reorganized its executive team, hiring a chief information officer, chief human resources officer and chief procurement officer.
Shea himself is legendary in the field of national security, having designed some of the CIA’s first computer systems in the early 1980s. He also was instrumental in the split of Science Applications International Corp. into Leidos Holdings Inc. and a new SAIC and later became president and chief operating officer for Leidos Holdings Inc.
Virginia Business: How is the integration going, both with Perspecta and with Northrop Grumman’s division?
Shea: First of all, there is the integration of all the people, places and things, and then there’s the integration of the business, the culture, attitudes and those kinds of things. From an integration standpoint, you always have to worry about, “How do I integrate our IT systems?” That’s going very, very well. “How do I integrate our business processes?” — that’s also going very well.
In our case, because we had “heritage Peraton” and then we immediately began to integrate the Northrop Grumman business and then we added to that the Perspecta business, it got a little complicated. Because Perspecta was a publicly traded company that was highly integrated, we are essentially folding ourselves into their systems. From an IT standpoint, we will get the benefit of a rigorous integrated environment.
The challenge is getting the data from Northrop Grumman, for example, because [NG’s systems are] in a completely different form and format. … They have different tools that they use for their business development. We have different tools here.
We had a lot of commonality, so we’ll integrate all the data. Once we integrate the data, you integrate the business processes that surround that. So, what’s your workflow? How do you go about your business? How do you create decisions? We have 700 [or] 800 policies right now that govern all three companies. I’d like to get that down to a couple of dozen.
As you look forward, you’re going to start making choices and [prioritize] one business over another or assimilate businesses.
That also is what unifies people because now they’re all one team, one mission, one fight, in terms of the business.
VB: You’ve had a lot of different jobs in the intelligence sector. How does this period compare with the rest of your career over the past almost 40 years?
Shea: Yes, wow, 40 years. I feel like I’m old. It’s interesting. Early in [my] career, I always considered myself a dry sponge in a wet environment. I wanted to soak up everything. I wanted to learn from people around me. I wanted to really absorb what they did and get a more comprehensive view of things. As a leader today, my responsibility is to help, train, teach [and] provide that experience to others. It’s
about developing leaders as opposed to becoming one.
Each time in your career that you advance to the next level, you take on a new set of challenges. You have more people. When I had 25 people, I thought it was a really big team. When I had 40,000, I had now reached the point where it was a big team, but it didn’t bother me as much because I had very competent leaders behind me in the organization.
Let’s [look at the] three most difficult jobs in my lifetime. The first was taking [Science Applications International Corp.], which was a publicly traded company, $11 billion, 40,000 people, 450 locations throughout the world, and splitting that into two publicly traded companies. That was considered to be an impossible job because very few companies of that size and magnitude can split. I always had this view: “Be unafraid of the impossible.”
I love jobs that are really hard, but that was a really challenging job because it was to take a single unified culture that had been together for 43 years and convince people there’s two paths, right?
The second part of it is when I stopped working at SAIC and Leidos, and I went from the leader of a 40,000-person company to a single consultant who only worked for [myself], that was a really difficult time. It was a challenge because I no longer had that mass of people behind me.
The third biggest challenge was creating something from nothing. If you think about the current Peraton, it was a divestiture from Harris. It had been the island of misfits. It was all the leftover businesses from all their acquisitions. How do you unify them into a single coherent company that could compete head-to-head with anybody? We’re still on that journey of the last four years [in] integrating Peraton.
VB: Why did you decide to make the big acquisitions of Perspecta and the Northrop Grumman division at the same time? Did it just happen that both opportunities came up now?
Shea: Well, first of all, you only buy companies when they’re available to be bought, right?
Northrop Grumman decided to sell that piece of the business. In the case of Perspecta, the board of directors decided to look at strategic alternatives, which had included a sale. We happen to have been able to purchase them because of the great financial backing by Veritas Capital.
We had always talked about having an opportunity to look at national security in a broader way. The belief that we had wasn’t just national security as defined by defense and intelligence. It was homeland security, it was cybersecurity, it was financial security, it was health security, it was the safety of our citizens.
I used to say that career success is all about three things: hard work, luck and serendipity. My belief is that when you build a company, it’s about the same kind of thing.
VB: What does the atmosphere of federal contract competition look like these days?
Shea: First of all, despite the change in administration, despite COVID and everything else that’s happening … the U.S. government, which is our principal customer, moves at pretty much the same pace over a long period of time. It’s a little bit more like a marathon. It’s not a sprint. They’ll put more money in one area, take some money out, but they are basically pretty stable in terms of the things that they fund.
What we had focused on when we [established] the company were really resilient markets, so things like space, intelligence and cyber. Within those markets, we focused on the really resilient parts or subparts of those markets.
In each of the markets we were in, we tried to take the part that had the least amount of impact to the vagaries of an administration change or Congress change or whatever: health business instead of health IT analytics, refocusing on fraud, waste and abuse inside of the health markets.
I think we are pretty well-positioned in the market. We don’t have a high concentration in any one particular [government branch], nor do we have a high concentration in any one particular program.
VB: With the May hack of Colonial Pipeline, we saw how critical cyber-security is to the nation’s infrastructure. How important is that going to be going forward?
Shea: Yes, so a little history is relevant here. In the space market, for example, there were always people talking about threats to space systems, but it wasn’t until 2007 when the Chinese blew up a satellite in orbit that people began to pay attention. It still took us almost 10 years to react to it. Cyber is the same thing.
People have been complaining about the risk to critical infrastructure like pipelines, electrical grids, waterways, all of those things … for the better part of 15 years, but today, it’s front of mind because of the Colonial Pipeline incident. It’s front of mind because [of] the North Koreans’  hack into Sony.
It’s an area that’s going to get increased attention, but the reason it’s important today is because it’s not about protecting the system. It’s about protecting our way of life that results from the loss of that system. If somebody hacks a satellite and you lose the ability to use your credit card because all credit card transactions go across satellites, all of a sudden you can’t buy food at the grocery store and you can’t buy gasoline at the gas station because everything that we do is computerized. Everything is all integrated. When you affect our way of life, it becomes important to people.
VB: How do you think robots are going to be part of our lives moving forward, and will they displace human workers in some situations?
Shea: Robots in some form have always been there in some way for the last 25 years, and I think you’ll see a lot more of that. Do I think I’m going to see robots walking through my house and serving dinner anytime soon? No, but I think for many things, I think it’s about replacing things that are just repetitive, menial.
The other thing is the dangerous things. For example, we produce a robot that is used by law enforcement and others for explosives. Robots are good for that because you can always buy another robot. You can’t buy another brother or sister.
Now, it really gets down to the risk and the cost. Is it risky to do? If it is, is it cost-efficient to do it that way? You can build a robot to do anything, but is it cost-effective?
VB: What is your larger goal for Peraton in the next five years?
Shea: What I always wanted to create was a company that was incredibly well-respected, did the very best job, the most important jobs that had to be done, the company that everybody had to count on to be there to do missions of consequence. In other words, if we don’t get it done right, somebody will die.
Whether that’s an emergency system to dispatch ambulances in a major metropolitan area or making sure that our satellites are safe or providing our best cyberdefenses in the world or managing the communications of the president of the United States, those are all things that matter.
I also want a company that is fun to work at, a place that is safe to work at, a place [where] you feel respected and rewarded for being there, and you just love being part of that larger team. If you have this feeling of coming to work every day where the things that you do matter, you love working in the environment that you’re in, you work in a good competitive environment, you’re taken care of as a family member, you’re in a safe work environment.
VB: What’s your office environment right now? Have some people returned to work in person?
Shea: We shut down all our offices [during the pandemic], except for basically people that had to be there because they work in a lab environment or a vault or something. We shut everybody else out because we wanted to protect the few that had to go into work, and everybody else went remote. For example, me, I’m sitting in my basement. This became my home office.
We’re going to start rolling back in people. We’re also going to recognize that this is a new way of life, working remotely. We’re going to actually keep some of our team off-campus. Let them continue to work from home and do that. It obviously becomes a cost savings to us.
Because of the three companies coming together, we clearly have an excess in facility space, so we’re going to do some consolidation, which will [take effect] over the next six to 18 months. I think we’ll be a better place because of it. We’ll have an integrated environment, smaller number of facilities, a lot of flexibility for our employees and [be] a safer place.
VB: Is there anything you’re excited about as you consolidate the three companies?
Shea: Well, first of all, from a cultural standpoint, we have three companies with really long traditions and history. I think bringing those three cultures together is pretty exciting. This will be a very different place because of that legacy.
We can build. We can innovate. We can have the two smartest people in the world come up with some new capability, and then we can drag that capability through subsystems to systems to major defense programs and implementing something on behalf of an entire department or agency because we have the enterprise IT skills. We get to see concept to reality from the core kernel of an idea to having it [become] a way of life for a larger organization. There are very few people that can do that.
I guess I would just say that Peraton is a company that’s like a brand-new startup that’s 125 years old.