Latest acquisition puts Saalex in a new league of federal contractors

By Jorge Mercado Monday, April 4th, 2022 | Pacific Coast Business Times 

https://www.pacbiztimes.com/2022/04/04/latest-acquisition-puts-saalex-in-a-new-league-of-federal-contractors/

Camarillo-based Saalex Solutions graduated from its status as a small business a couple of years ago, leaving it unable to bid on the type of federal contracts that helped the company grow over the past two decades.

Now, the company has shifted focus, with acquisitions like Rhode Island-based Netsimco — in a $30 million deal announced March 16 — to help it compete on a larger stage.

“We saw the need to grow rapidly because we were basically a small large business, and we need to be a larger large business in order to be able to afford the resources necessary to compete against Northrop Grumman and the Boeings of the world,” Saalex CFO Randy Wheeler told the Business Times. “This growth through acquisition was important in order to continue the growth of the company and propel us to the next level.”

Saalex is an information technology company for government and defense clients, founded in 1999 by CEO Travis Mack.

The company's acquisition of Netsimco will allow it to reach annual recurring revenue of $100 million. For context, Wheeler said the company generated about $5 million in revenue in 2010, and has shown “consistent growth” to reach the $100 million mark.

In a sense, Wheeler said, Saalex has been “the victim of its own success.” In 2017, he recalled the team discussing a large contract the company held that would be up for re-competing within the next year.

“If we didn't win that contract, it would be devastating to the company,” Wheeler said.

Saalex put together a strategy to “aggressively” bid for new contracts, in case it needed to replace the large one that was up for renewal. Instead, the company won the re-compete on the large contract, and also won nine new contracts in a row, which took it out of the category of companies that can compete for federal contracts set aside for small businesses.

Some of the contracts Saalex won in 2017 and 2018 will come up again soon, and Saalex will no longer be able to bid on them as the primary contractor.

That is why since 2019, Saalex's main focus is to grow through mergers and acquisitions.

“There needs to be apprehension in anything that you do, nothing is guaranteed,” Mack said. “But I'm jazzed because honestly I think the folks that are behind me and Randy are actually better at executing the strategy than Randy and myself are.”

Wheeler said after the Netsimco acquisition, Saalex will be building up its reserves for another acquisition — hopefully one more within “the next year or so,” he said. “In the aerospace and defense vertical, size and scale gives you advantages. You have resources that you can utilize in order to put yourself in a position to bid more opportunities or maybe position yourself correctly,” Mack said. “You don't just wake up and become efficient at bidding and proposing. It requires resources, and scale gives you those additional resources that you need to compete.”

The goal each year is to win enough contracts to replace the backlog left from the previous year, Wheeler said, adding that the company “burned off” about $100 million since last year, something it is looking to make up in fiscal year 2022.

Saalex now has about a dozen active contracts. Its acquisition of Netsimco will bring the company to around 700 employees nationwide, as Mack confirmed the company's goal is to keep everyone from Netsimco on during the transition.

A few days after announcing the acquisition, Saalex also announced the promotion of Wheeler to executive vice president, along with his current CFO position. Wheeler has been with the company since 2004 and described himself as the “glass half-empty” person, while Mack is the “glass half-full” type of personality.

“Randy and I have been together for a long, long, long time and we do disagree. He tells me the unvarnished truth and sometimes you don't want to hear that,” Mack said. “But I think what I've been able to do is to listen, and we're always able to get to the middle of the road, which is important. He comes from a different perspective than I come from, and both perspectives are needed.”

Robert Bezduch was promoted to president of Saalex, a position Mack held for 22 years.

The importance of this move, Mack said, is that it allows him to relinquish that role of day-to-day operations, “so we can strategically look at what we need to be, where we need to be and how we are going to get there over the next three to five years.”