Following the completion of the all-stock merger between Vectrus and Vertex that resulted in the establishment of V2X, Chuck Prow, CEO of the new and more diversified company, engaged in a Q&A with GovCon Wire to share the early discussions about the combination and to expound on the rationale behind the transaction.
The eight-time recipient of the Wash100 Award also talked about the opportunities for and the similar culture among the more than 14,000 V2X employees.
“I always tell our employees that growth is not a financial measure; it is a measure of opportunity. I look forward to seeing how the employees of V2X will collaborate, innovate and support each other while continuing their passion for their missions in the coming weeks and months.”
Read the full Q&A with V2X CEO Chuck Prow below:
GovCon Wire: How did the combination of Vectrus and Vertex come about?
Chuck Prow: In November of last year, I met with the leadership of American Industrial Partners, the owners of Vertex, to discuss our respective views of the market and the industrial logic of combining the Vertex and Vectrus businesses. It was very clear in these early discussions that not only did we see the market and the combination logic similarly, but we saw the potential for the commonality of our cultures and the complementary nature of our respective capabilities to create a true force in the marketplace.
It should also be noted that we knew both the Vertex business and the portion of the Raytheon business that Vertex was in the final stage of acquiring, very well. We looked at Vertex in 2018 prior to the AIP acquisition and the Raytheon business early in that specific process. Although the respective timing of those processes was not right for Vectrus, we were very confident strategically that both the Aerospace O&M and Training businesses were complementary to our strategy, and they were being driven by the same technological and market forces of managing infrastructures at scale through the use of enhanced technology.
GovCon Wire: What was the rationale for the combination and how do you see the company evolving in the coming years?
Chuck Prow: The rationale was both strategic and financial. Financially, the additional scale and resources will allow V2X the ability to be competitive for opportunities across the federal and international markets while having the resources to invest in growth opportunities into the foreseeable future. Additionally, with projected margins greater than 8 percent, the V2X EBITDA margins will be in line with the broader government services cohort.
Strategically, the complementary nature of the two businesses was quite remarkable. The diversity of the contract types, clients, geographies and capabilities make V2X a very balanced business providing benefits for both our clients and investors. From a capability perspective, the V2X business will be in a position to lead the operation and logistics, aerospace, training and technology segments of the federal services marketplace.
GovCon Wire: What excites you the most about the future of V2X and what’s next for the company?
Chuck Prow: To this point, we have discussed the logic of the combination that created V2X from a market, client and financial perspective. What I’m most excited about is the opportunities V2X creates for the 14,000+ people of V2X operating around the globe, often in remote and austere environments.
As I mentioned, the cultures of Vectrus and Vertex are very similar. Our people are driven by a passion for the missions we are privileged to operate and share a common core values system of Integrity, Respect, Responsibility and Professionalism.
I always tell our employees that growth is not a financial measure; it is a measure of opportunity. I look forward to seeing how the employees of V2X will collaborate, innovate and support each other while continuing their passion for their missions in the coming weeks and months.
GovCon Wire: The operational segment of the broader federal services marketplace has recently been through significant consolidation. Do you see this consolidation continuing? How do you see that market evolving in the near and midterm?
Chuck Prow: It is true that the rate and pace of the marketplace consolidation, especially since the Army Logistics Civil Augmentation Program V award, has been astonishing.
When I joined Vectrus in 2016, there were easily a dozen viable competitors for most opportunities. Today, there are four competitors of scale across the operational segment of the government services marketplace.
Having said this, as digital and physical infrastructures continue to converge, additional competitors will emerge just as our addressable market will continue to increase. The Net Net is yes, I do see additional opportunities to consolidate. Especially with new and innovative technologies and technology-based service providers that will enhance our strategy to operate infrastructures at scale in a more predictive, technology-enabled and cost-effective manner.