Part two of our series focuses on growth equity in the government contracting community, featuring  Amy Bleken, CEO of Client Solution Architects, and Morgan Higgins, Principal at Blue Delta Capital Partners. A sit-down discussion on the working relationship between an operating entity and a growth investor. The collaborative customer-centric environment embraced by both partners and the role each play in the growth of Client Solution Architects.

Andy McEnroe: Hi! Hello! And welcome to another episode of “Beyond Strategy,” an ACG National Capital region podcast focused on the leaders that are driving innovation, enhancing understanding and achieving market clearing outcomes in and around the DC area. I am Andy McEnroe of Raymond James Defense and Government Investment Banking team

Jenn Wappaus: And I am Jen Wappaus with the Infinity Group at RBC Wealth Management.

Andy McEnroe: This is episode number four. And frankly, I’m shocked we haven’t been canceled yet. But we did promise you a two-part episode focused on growth equity. And as promised, here’s part two of our feature.

Joining us today is Amy Bleken, CEO of Client Solution Architects, a Blue Delta Capital Partners portfolio company, and Morgan Higgins, Principal at Blue Delta Capital Partners. In this episode, we dive into the operational cadence between a growth investor and its portfolio company. We also discussed the dynamics of when it is the right time to partner and how a partnership can benefit both sides of the equation.

Jenn Wappaus: Andy, you can really tell they enjoy working together. When I think back about this discussion, you’ll hear common themes around partners and relationships. And you can feel what a collaborative environment they have, both at CSA as a standalone company and Blue Delta, but then their interactions together as partners.

Andy McEnroe: Now here’s our conversation with Amy and Morgan.

Jenn Wappaus: Welcome to “Beyond Strategy,” an ACG National Capital region podcast. This episode is part two of our focus on growth equity in the government contracting community. Last time we spoke with Kevin Robbins and garnished his insight on markets, as well as how Blue Delta Capital Partners approaches the government contracting space.

We now have the opportunity to go a layer deeper to understanding how an operating entity works with a growth equity firm. We’re pleased to be joined by Amy Bleken, CEO of Client Solution Architects and Morgan Higgins, Principal at Blue Delta Capital Partners. Thank you both for being here today.

Amy Bleken: Thanks for having us.

Morgan Higgins: Andy and Jen, thank you so much for the opportunity to be here with you,

Jenn Wappaus: Amy, before we discuss the partnership between CSA and Blue Delta Capital Partners, would you tell us and the audience about your experience in the government contracting space? And how CSA serves the federal market?

And CSA is really exciting. I’m really happy to be a part of that company. We are a leading provider of integrated technology and operational support services, serving the Navy, Army Combat Commands, and Joint Staff customers worldwide. And what really makes us unique is that we implement solutions by embedding our expertise across all of our customer movement domains, which are divided into two verticals: mission support services and cyber and IT.

Jenn Wappaus: Morgan, we heard the origin story of Blue Delta from Kevin, in our last episode. How did you come to join the team? And what did you leverage from your past life as a commercial banker at JP Morgan to find success at Blue Delta?

Morgan Higgins: It’s a great question, Jen. I’ve known the founders and partners of Blue Delta for a long time, and I’ve always admired the reputation in the industry. Over time, we found more ways to partner when I was at JP Morgan. And always with a focus on finding great companies to work with. I realized we had a lot in common.

Andy McEnroe: We spoke with Kevin about how growth equity, venture capital can be additive to a company in a lot of different ways. Amy, CSA’s partnership with Blue Delta Capital Partners came together through the acquisition of Capstone as opposed to growth equity, in the more traditional sense when capital is placed on the balance sheet for growth purposes or for a dividend for a selling shareholder perhaps.

How was the partnership formed? And then you know, after Amy comments, Morgan, I would love to hear the combination story from the Blue Delta perspective. One, to see if there’s any difference…you know, maybe we can find some division here. But two, also just to see how the perspectives of both an operating entity and an investor can differ in the same situation?

Simultaneously, Blue Delta was looking for an acquisition target that would ignite the one plus one equals three formula for CSA, and that’s when Capstone entered the picture. The owners of Capstone wanted to do a full exit. So the creativity behind the scenes to make that deal happen was a first for Blue Delta, but it really opened up the aperture to new avenues of growth through investment.

Morgan Higgins: Great, just add on to that… Blue Delta was thrilled to have the opportunity to partner with CSA to help facilitate the acquisition of Capstone. From our perspective, we felt that CSA had a great infrastructure to build from. They had a great back office, solid talent, good customer intimacy and strong business maturity.

Capstone had similar capabilities with very similar customer intimacy and strong contract vehicles. We viewed the combination with the injection of talent like Amy and Joe Kuhlmann as the CFO, as being the catalyst to help create a key player in the middle market space that is poised for growth.

Andy McEnroe: That’s wonderful. And certainly it seems like the company is positioned for outstanding growth going forward. I do want to take a step back from the specific example here that we’ve been talking about. And Morgan, hear from you about how Blue Delta Capital Partners can be helpful to any portfolio company beyond just providing capital. Meaning, how do you help the operations, the sourcing, the business development functions?

Morgan Higgins: It’s a great question, Andy. And absolutely, when we make an investment, we want to be involved beyond just the capital. We hope to help in a variety of ways, and we really take our clues or cues from the portfolio company. We can help with recruiting key talent. We always put in an option pool concurrent with our investment to help attract, motivate and retain key talent.

We also help our companies to think through how to mature the operations of the business, including pipeline development, key opportunities, and bids that are coming out, strategy around horizontal growth or vertical growth, teaming partners, and then always tuck in M&A ideas. A lot of times we’ll spend conversations thinking through inorganic growth, both from a company perspective and what you’re missing from a capability or customer set. Or if there’s a key contract vehicle that the company really needs access to in order to facilitate that growth.

Our goal at the end of the day is to help the company create enterprise value by showing them avenues to grow, both organically as well as in organically,

Jenn Wappaus: Amy, the entire market is flush with capital right now. Why Blue Delta? And when they invested in this new CSA, so to say…

Amy Bleken: Yeah, there are a lot of choices. And that’s a great question. I have a 20-year trusted relationship with the partners at Blue Delta. I’m very fortunate for that. A lot of my career has been shaped by their advisors, primarily, Phil Nolan. So, in addition to the trust that we have built over the last two decades, they also bring access to exceptional and proven industry leaders. I like their support of a balanced yet non-controlling corporate governance model with how they structure the deals.

And maybe most importantly, they provide access to an amazing option pool, as Morgan mentioned before, as well as those investment dollars, to really, you know, dedicate to our growth.

Andy McEnroe: I’d like to think that our audience, being that this is an ACG podcast, is focused on M&A and growth-oriented companies. I’d also like to think they’d want to work with an investment banker like myself. And so as they listen to this podcast, Amy, I think a lot of companies out there want to dig into that working relationship.

How often are you interacting with Morgan and Phil and the rest of the Blue Delta team? How have they been helpful at the board level or the operational level? Hold nothing back here. Pretend like Morgan’s not in the room with us. Because, seriously, there’s a lot of companies out there contemplating whether it’s with Blue Delta, or one of the other fine growth equity firms in the market, thinking, “Hey, I could do this. I could take my company to the next level. But what does that really mean for me, the owner, the CEO, the manager, and how my day-to-day life changes?”

Amy Bleken: I mean, I think that that’s a great question because a lot of the people that I talked to in industry have that same question. Like what is the relationship really like? And I can honestly say that Blue Delta is non-controlling. And really what they are as a business partner, they are a value-added partner to my C-suite, to my management team.

So that kind of relationship truly fosters engagement that is highly collaborative and advantageous, quite frankly, it’s not unusual for me to talk to Morgan, or Phil Nolan several times a week just for counsel advice and guidance, their personal and professional networks… Getting access to that is unparalleled, really in this industry, if you know who they are, right. And as far as the board goes, I have surrounded myself and CSA with an illustrious group of leaders. It’s amazing. If you haven’t checked out our board of directors, please do so because they are the best of the best in the industry. And they provide sources of advice not only at our quarterly board meetings, but outside the boardroom as well. So it’s a great, highly collaborative, very communicative set of relationships.

Morgan Higgins: Andy, as I’m sure Kevin mentioned, in his segment, independent directors and forming a board is something that Blue Delta is very passionate about. And we’re very focused on having that unbiased opinion that’s not associated with the company in the boardroom, to really help provide advice to the C-suite, as well as to Blue Delta as the investor.

Andy McEnroe: Well, and pulling that onion back a layer, if you will. Amy, is it fair to say that you would not have access to those industry experts or the quality board members you have absent Blue Delta? Or is it additive to the relationships that exist inside the company, currently?

Amy Bleken: I think it’s fair to say that I have those relationships because of the access and the relationship and the reputation that Blue Delta and its advisors and its partners have in the industry.

Andy McEnroe: So, Morgan, this question is for you. Building off of that, obviously, you’re putting yours – as in Blue Delta’s – reputation on the line anytime you back a company. And we talked about the different ways you can be beneficial to your portfolio companies. But what characteristics are you looking for in a company, in a management team that make it a Blue Delta-worthy investment?

Morgan Higgins: Great question Andy. It’s all about the people. We focus very heavily on the management team and what their goals are. The capabilities and customer said is absolutely important. And we do take a look at that. But if you don’t have a management team that’s squarely focused and excited about growth, it’s tough for us to get interested.

Jenn Wappaus: So tough question that I kind of want to ask. Will each of you give us and the audience a one word phrase on why this partnership between CSA and Blue Delta works? Morgan, you’re first.

Morgan Higgins: Trust and transparency.

Jenn Wappaus: That was two but…

Amy Bleken: I actually have a sentence. So, I’m sorry.

Andy McEnroe: To be fair, the way we wrote the question it does say one word or phrase.

Amy Bleken: To play off Morgan, trust is a great business practice. You can’t do anything without that trust.

Jenn Wappaus: And you guys have brought up trust partnership, you know, all working together. And it’s it’s clear just seeing you guys here today.

Andy McEnroe: Well, then this next one’s a two-part question then. So, trust partnership, the ability to collaborate a strong board of directors helping in the operational sense as well. What’s next for CSA moving forward? Are you looking at additional M&A targets? Are you focused only on organic growth? You know, Amy, why don’t we start with you? And then the second part of that question, well, after we answer the first is, what does success look like for this partnership, when we get to an end state?

Amy Bleken: CSA is poised for growth, and how we grow crosses the spectrum, right. We are looking through methods like organic net new contracts, as well as working with Morgan and our team to do tech and acquisitions. They can really act as a force multiplier to our pipeline and our backlog. So growth, healthy enterprise value. Growth is definitely on the horizon.

Andy McEnroe: We mentioned the hope is that there are a lot of business owners out there. So can you give me a little more specificity in terms of what you’re looking for, potentially, we’ve got a listener in our audience today, that could be your next tuck-in target.

Amy Bleken: So if you have, you know, really those distinguished relationships, if you will, with customers, where you are offering a, you know, a one of a kind service, but you haven’t had the investment in the back office, or the infrastructure to kind of really support the maturity of a growth, that’s really required when a small business goes into that weird mid-tier territory: I’m interested in hearing from you because I think that the investment that we’ve made in CSA in the back office, our infrastructure, our processes, all of the industry required certifications and standards, we can bring that to bear. And we have a very strong backlog, but we’re looking to add, you know, diversification in our customers, our contract types and the solutions that we can provide throughout the entire federal market space.

Andy McEnroe: Are there customers or contracts that you’re focused on currently?

Amy Bleken: Yes, we are primarily focused on, you know, since our portfolio is rich in DOD, specifically Army and Navy, we would really like to continue to expand in the Air Force, as well as federal civilian. I think that we have the right contract vehicles to grow from, we just need a little bit more help in getting that customer intimacy to make that make that transformation and growth in those areas.

Andy McEnroe: So look into your crystal ball. Morgan. I asked the question earlier, what does success look like? You know, as Amy continues to build out the team, both from an inorganic strategy perspective, as we were just talking about, and in organic pursuits with new contract awards, what does success for the partnership entail?

Morgan Higgins: I think what we strive to do is build one of the prominent middle market firms that focuses across the DOD and civilian sectors, and is really helping the government advance their mission. That would look like success for us. Building enterprise value for the shareholders as well as for all that are involved. The employees.

Jenn Wappaus: Amy, what advice do you have for a fellow executive or entrepreneur who may be considering bringing on outside capital?

Amy Bleken: I think this is a question that is going through a lot of business owners minds today. What I would say is, you know, there are so many attractive options, the best option that’s going to be for a business owner is one that’s going to be tailored to the business and what that owner needs. So the ultimate decision on who you partner with for that capital investment should really depend on both parties, aligning their interests and overall expectations.

Andy McEnroe: Morgan, how does that look, from your perspective, where Blue Delta, predominantly growth-focused very much in an equity position, as opposed to some sort of hybrid or debt like position? You know, what does the entrepreneur need to understand about what Blue Delta’s capital is bringing to the table?

Morgan Higgins: I would say it’s all about the relationship. And it’s really how can we help you advance your mission and your vision for the company, and making sure that that aligns with what we think where the company should go. And it is absolutely a partnership. We tell companies to do as much diligence on us as we do on them. And so you know, getting to know one another and building that trust during the period of, you know, the dating period is something that I would say we take fairly seriously.

Jenn Wappaus: So we end all of our interviews with what we think is the most important question that we ask, and what is the most important thing that we should know about each one of you?

Amy Bleken: I’ll go first. All right, I’m always looking for collaborative opportunities, right? I really believe that two heads are better than one in this approach. So that’s a significant asset. When you can really have a collaborative working environment, no matter what it is that you’re working on. If you have all the right people in the room, contributing to solving the problem. I love that.

Morgan Higgins: And for me, I’m always happy to help any person or company. And if you’re looking for advice, and don’t know who to call, call me. I’m a connector and I may have some ideas of people you can talk to or who can help you out even if I’m not the right person for that problem.

Andy McEnroe: Outstanding. Well, Amy Bleken, CEO of Client Solutions Architects. Morgan Higgins, Principal at Blue Delta Capital Partners. Thank you both for joining us here today.

Amy Bleken: This was a lot of fun. Thanks.

Jenn Wappaus: That was a great episode. Morgan and Amy have such a great working relationship. I hope you the audience enjoyed our two-part look at growth equity investing in the government contracting markets.

Andy McEnroe: After hearing from both Kevin and Morgan and then Amy from the operational side, I wouldn’t be surprised if there is a flood of term sheets heading into Blue Delta Capital Partners going forward.

Well, as always, a reminder subscribe to “Beyond Strategy,” an ACG National Capital region podcast, wherever you get your podcast. I hope you’re enjoying our conversations with some of the industry leaders around the National Capital Region. If you have any suggestions on who we should talk to you next, feel free to contact us at acgcapital@acg.org.

For Jenn Wappaus, I am Andy McEnroe, thanking you for joining us. We hope that you’ll join us again next time.