Harris Williams maintains strong relationships with leading companies across our 10 Industry Groups. Ongoing dialogue allows us to deeply understand how M&A supports these companies’ growth strategies, and how those strategies are evolving—which is essential knowledge in today’s dynamic environment.
In this series, we share recent conversations with key players in the industry, focusing on the qualities they're seeking in upcoming acquisitions.
Derek Lewis, a managing director in the Harris Williams Business Services Group, recently spoke with Ted Hanson, ASGN’s president and chief executive officer. Here, we share Hanson’s views on new opportunities being created in the midst of the COVID-19 crisis, ASGN’s M&A priorities, and getting deals done in a virtual environment.
Have any of the changes caused by COVID-19 created new opportunities for ASGN?
For one thing, if digital transformation was important coming into COVID-19, it's even more important coming out of it. Now that customers are feeling more confident that the world's not falling apart, they see the need to continue on their strategic technology road maps more clearly than before. That generates continued demand for our services.
While many of the projects that we’re helping clients with now pre-date COVID-19, there are also some trends that have been accelerated by the pandemic. One is the return of some work to onshore resources. The global switch to remote working was disruptive to some companies’ operations, and with wage differences being smaller than they used to be, offshoring has become relatively less attractive to some businesses. There will always be an offshoring market, but I just don't think it is what it was in the past.
That same thinking extends to the supply chain. Some of our customers have realized that while there are many good reasons to spread your supply chain all over the world, there’s an inherent risk in doing so. Now some are identifying activities that they want to bring back to the U.S. or to nearshore locations. Again, that will be a demand driver for our services. So while those aren’t new trends, they have gained some momentum due to COVID-19.
As you look toward the next 12 to 24 months from an M&A perspective, what are you are looking for in acquisitions?
We've established a solid foothold in the commercial and federal government markets for IT services, and we’re focused on bringing more capabilities into the organization to better serve those customers. Two recent acquisitions by our Apex Systems division reflect that goal in the commercial market. One was of a firm called Intersys, which has strong capabilities in big data, business intelligence, and application development for the technology, consumer, healthcare, and financial sectors. Intersys also has a nearshore delivery center in Guadalajara, Mexico, which will help us deliver better price points and skillsets to our U.S. clients. We also recently announced the acquisition of Leapfrog Systems, which has very strong digital transformation capabilities in financial services, insurance, and healthcare.
Likewise, in the federal government space, we're looking to make acquisitions that give us new capabilities, new customer sets that are hard to break into on an organic basis, or key contract vehicles. As an example, about two years ago we acquired David Hale Associates, a key IT security provider to the FBI. We already had a solid practice in cybersecurity, but the acquisition made us that much stronger.
Earlier this year, we acquired Blackstone Federal, a major IT solution provider to the Department of Homeland Security. Again, this was a place where we had a minor footprint, and the acquisition gave us a better hold on that account and deeper capabilities.
M&A has been a good way for us to build our capabilities and move higher up the value chain with our clients, and recently we haven’t had to use a lot of leverage to do that.
How was the Leapfrog acquisition different than deals that you've done pre-COVID-19?
In general, it seems like many of the deals getting done now were already in motion to some degree pre-COVID-19. As things have leveled out here a bit, those deals have started to come back, and that's where we were with Leapfrog. We were about two-thirds of the way down the road with them when everything froze up. Once we knew both our businesses were holding up well, we had the confidence to get it done. We had already built the relationships, and we figured out ways to manage the technical aspects of the deal. I think it’s harder to get major new deals done in a virtual environment—it’s just more difficult to get to know each other and build trust between management teams when you can’t meet in person.
Derek Lewis is a managing director in the Harris Williams Business Services Group. He and his colleagues specialize in professional services subsectors such as consulting, information technology and workforce solutions; as well as in commercial and industrial services subsectors, including environmental and waste, food service, and facility services.