Tribes buying Hawaiian IT firm

September 2018, By the CUJ

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MISSION – The Confederated Tribes are in the final stages of purchasing a Honolulu-based disabled-veteran-owned business that provides solutions and products in the areas of information technology, homeland security and emergency management, among other services.

A tentative verbal agreement on the final terms of the deal has been reached and the next step is a work session with the CTUIR Board of Trustees to discuss the financing and seek final approval, which likely will take place this month.

Native Hawaiian Veterans (NHV) LLC will become part of Cayuse Technologies, the IT business owned by the Confederated Tribes of the Umatilla Indian Reservation (CTUIR).

NHV, which has been in operation for 11 years, employs about 150 people.

The last six months have been a period of transition for the company, according to a letter to employees written in the July newsletter by new NHV President Gil Tam.

“Operationally, we have experienced some loss in revenues due to the expiration of several contracts, and we are working hard to win more contracts that will help us replace lost revenues and build on our current backlog,” Tam wrote. “…As we embark upon the second half of 2018, we will be focused on strategic growth … growing our business and revenue base with innovative ideas and solutions; growing quality relationships to be in position to capture opportunities as they present themselves; and growing our people with programs that help us think big and stretch ourselves to grow personally and professionally.”

The businesses, when combined, will initially continue on their current path with no major management changes, according to Billy Nerenberg, Chief Executive Office at Cayuse Technologies, which employs 250 people.

Nerenberg, on the day the CTUIR Board of Trustees (BOT) approved a resolution that set the purchase in motion, called Aug. 6 the “second biggest day in Cayuse Technology history,” the first being the day the business opened. The resolution directed the Treasurer, Tribal staff and Cayuse Technologies staff to return to the BOT with a financing package for their final approval of the deal.

General Council Chair William Sigo and BOT member Rosenda Shippentower voted against the acquisition of Native Hawaiian Veterans. Voting in favor of the purchase were BOT Vice-Chair Jeremy Wolf, Treasurer Doris Wheeler, Secretary Kat Brigham, and members Aaron Ashley and Sally Kosey. (BOT member Woodrow Star was out on personal leave.)

In addition to the NHV resolution, the BOT also approved three resolutions which established a holding company structure for Cayuse Technologies, a move that was needed for Cayuse to take full advantage of its recent certification as a Small Business Administration 8(a) company.

In one of the resolutions, the BOT created Cayuse Holdings LLC, which became the parent company for Cayuse Technologies and a newly formed sister company, Cayuse Sharing Services LLC. The holding company structure is intended to protect tribal sovereignty and protect tribal assets, Nerenberg said.

Koko Hufford, Chair of the Cayuse Technologies Board of Directors, praised the CTUIR for its support in growing the company by forming the holding company structure and authorizing the acquisition of NHV.

“I believe the Small Business Administration’s 8(a) certification and the Board of Trustees’ approval of our new holding company structure will both benefit Cayuse and the Tribe in the coming years,” Hufford wrote in an email. “I’m hopeful that we’ll be able to provide more jobs for our community and grow our revenue stream, which will mean a more diverse economy for the CTUIR. I want to thank all the Cayuse and Tribal staff who worked together diligently over the past several months to help achieve these milestones.”

Nerenberg said he was pleased that Cayuse Technologies received the go-ahead from Tribal leaders to operate under a legal structure that will allow the company to take advantage of the 8(a) designation.

“What the Board did today was say ‘You are our company. Get in the race. Go get your track shoes on and run.’ Now we’ve got to go win some races,” Nerenberg said.

Wildhorse revenue plus federal grants/contracts for the tribal government are the two main revenue sources for the CTUIR economy. Nerenberg said the Tribes have taken steps over the years to try and diversify the economy but the new holding company structure and participation in the 8(a) program should greatly accelerate the effort to add another major revenue source.

Toward that goal, the SBA created 8(a) to give small businesses and tribes a “leg up” on meeting the complex requirements to acquire government contracts. The U.S. government is the single largest buyer of services in the world. Through the 8(a) process, around 23 percent of what the U.S. government spends is committed to small disadvantaged groups such as women entrepreneurs, veterans, some 8(a) designees, and some Tribes, Nerenberg said.

The new holding company structure will allow Cayuse Holdings to create and manage subsidiary companies (some that may apply for 8(a) certification), which can go after government and non-government contracts and still remain within the government’s required size standards to be certified as an 8(a) small business.

The Board’s actions Aug. 6 also created Cayuse Shared Services which will provide in-house support services (such as human resources, finance, and IT) to the holding company, Cayuse Technologies, and the other subsidiary companies that will soon be created. Cayuse Shared Services will not be performing project or contract work itself.

Usually 8(a) designated entities are much less experienced than Cayuse Technologies and typically spend four or five years in the development stage, but Cayuse is further along since it’s inception in 2006, Nerenberg said.

“We’re acquiring a company that’s been in business 11 years so we can hit the ground running,” he said. “Normally we’d have to hire and train and find contracts. Instead, we’ve found a company that already has contracts, employees, and is grant qualified. This jump-starts our government contracting business by several years.”

Nerenberg said it was a natural progression for the CTUIR to take full control of Cayuse Technologies, which was managed for the first few years by Accenture and to begin growing the company in a new direction.

“It’s a complex business, but the BOT absolutely understands this and is embracing it,” Nerenberg said.

In addition to approving the purchase of Native Hawaiian Veterans and the holding company structure, the Board of Trustees also approved a $2 million line of credit to Cayuse Holdings LLC through December of 2019 to “allow businesses to grow and create economic diversity,” according to the resolution that passed 5-2. (Sigo and Shippentower also voted against the line of credit.)

Nerenberg said the line of credit is a common need for young businesses, especially those doing business with the government, which typically can take 60-90 days to pay an invoice for the contract work that’s been done. In the meantime, a company must pay its employees and keep the lights on, so a credit line is used as a bridge to fill the timing between doing the work and getting paid for it. When cash is needed, Cayuse will draw that amount, then repay it within a few weeks.

“It’s not a loan to buy tables and chairs,” he said. “It’s like a credit card to pay bills before you get paid, to cover any gaps.”

Cayuse Holdings LLC, adding the number of employees at NHV with Cayuse Technologies, doubles in size so the Board “doubled our line of credit.”

“It’s the conservative way to do business,” Nerenberg said. “It’s the Tribes supporting their business, giving it the money tools to allow the company to grow.”

What is Native Hawaiian Veterans?

Native Hawaiian Veterans is a company that lists information technology (IT) as the third area of expertise on its list of “services, solutions and products” offered.

NHV also provides services, solutions and products in the areas of homeland security, emergency management, communication equipment, professional staff augmentation, munitions and explosives-of-concern remediation, and strategic communications/creative services, according to its website.

NHV and Cayuse Technologies are most closely aligned in the area of IT services and government contracts.

Billy Nerenberg, CEO at Cayuse Technologies, said some of the contract work is very similar.

For example, one of NHV’s largest contracts, which requires top-secret clearance, requires employees sitting at computers to analyze and decipher intelligence feeds for military and government organizations.

“We do almost the identical process with AT&T,” Nerenberg said. “We see intelligence feeds from AT&T retail stores and create reports for leaders of AT&T.”

One thing Cayuse Technologies doesn’t do is military operations. In some instances, NHV has sub-contracted for outfits to destroy unexploded ordnance.

According to its website, NHV is big on a family-type atmosphere, using the Hawaiian word “ohana” – the circle of those who are family and those chosen as family – in its vision.

The company mission is “to be a trusted partner earning customer loyalty while fostering growth for our Ohana and enriching our community.”

Other values include Alaka’I – leadership; kina’ole – flawlessness; Lokahi – collaboration and cooperation; and Ho’okipa – generosity.

The company is committed to Kina’oile … “to do the right thing, the right way, the first time.”

In a July 2018 letter to employees, new NHV President Gil Tam wrote:

“I am personally aligned with the NHV commitment to service to our community, and I am passionate about paying it forward to improve the social-economic well-being of Native Hawaiians, veterans, and at-risk youths who need a helping hand along the way to making a positive change in their circumstance, and in turn, help others.”

A company from Hawaii? So what does that mean for CTUIR?

Now that Cayuse Holdings LLC has been established, the Confederated Tribes of the Umatilla Indian Reservation has a legal structure to allow its businesses to grow.

Right now, Cayuse Technologies, Cayuse Shared Services and Native Hawaiian Veterans are the companies under the umbrella of Cayuse Holdings LLC. In the near future, additional subsidiary companies will be started.

The acquisition of a company that operates in Honolulu, Hawaii – 2,800 miles away across the Pacific Ocean – may not seem to be a perfect fit for the Umatilla Indian Reservation in the dry-desert of Eastern Oregon.

So what’s the upside for the CTUIR and its members?

Number one, according to Billy Nerenberg, CEO at Cayuse Technologies, is that it creates new diversified revenue for the CTUIR economy.

Winning contracts from other regions pulls money to the Umatilla Indian Reservation.

With its current contracts, the CTUIR will be generating money from Hawaii to go with revenue from Virginia, Washington D.C., and Florida.

“Without the contracts, that money would not be coming to the Reservation. Now the money will be coming here and by nature, it will create more jobs,” Nerenberg said.

Number two, although not immediate, it will create new jobs and new services. As an example, Nerenberg points to the potential for more contracts like the one it has performed for the federal government since 2011, with the Department of Defense. The government, Nerenberg said, prefers the work done here because Cayuse Technologies is experienced in that line of work, and it can be done in a remote and safe location that is cost effective for the government.

“Over time,” Nerenberg said, “some of those kinds of jobs will come here.”

And number three, it creates economic diversity and a new source of funds for tribal government programs and projects. Cayuse Holdings’ companies complement the revenue brought in to the tribal government’s coffers from government grants and contracts and Wildhorse Resort & Casino.

“Now the structure is in place. We go to work, get the businesses. All of these businesses will be the Tribes’ businesses,” Nerenberg said.