CAE-Link Redux

CAE has been on a buying binge, including a major rival in defense training. MS&T Editor Rick Adams, FRAeS, spoke with leaders of the blending companies.

While the world was preoccupied with the pandemic, CAE went shopping.

In the civil aviation sector, CAE’s acquisition spree the past year has snapped up two competitors – Textron’s TRU Simulation + Training Canada (the down-the-street annoyance that began as Mechtronix) and Flight Simulation Company in The Netherlands; ventured into non-training businesses such as Sabre’s AirCentre airline personnel management, RB Group for flight crew management software, Merlot Aero Limited (also aviation crew optimization software), added GlobalJet Services aviation maintenance training, and arranged a partnership with The LOSA Collaborative to perform Line Operations Safety Audits of CAE customer-operators.

In the defense training domain, CAE USA acquired a minority stake in SkyWarrior Flight Training, Pensacola, Florida, which delivers the Naval Introductory Flight Evaluation (NIFE) program for the US Navy and Marine Corps.

But the blockbuster deal was the acquisition of L3Harris Technologies’ Military Training business for US$1.05 billion, which passed all regulatory and financial hurdles in July. The package includes Link Simulation and Training; Doss Aviation, provider of initial flight training to the USAF; and AMI’s simulator hardware design and manufacturing facility.

Following the formal closing, I spoke with CAE Defense and Security leader Dan Gelston and his lieutenants about the combined organisation’s vision. Following are excerpts from that conversation.

MS&T: My first question is about the backstory. How did this come about?

Dan Gelston (DG): CAE, particularly Defense and Security, had actually been looking at Link for quite some time, well before I arrived on the scene. In fact, over a decade ago there was a Project Cowboy. Ray Duquette, ‘Duke’ Duquette, who just retired, was the mastermind behind Project Cowboy, not surprising a reference to Texas. It was a hard look at the potential acquisition of, back then, L3’s military training business, obviously prior to the L3-Harris merger. So for quite some time, he had looked at the Link business with its incredible legacy stretching back to the 1920s as a fantastic competitor, a worthy company in the market, someone we really respected, a company that we saw a mutual passion for our market, for training and simulation, and preparing warfighters and those in harm's way. And one that was highly complementary to our business. So when the opportunity came up, a unique opportunity to potentially purchase them, we were extremely excited. And not very often do you get to acquire a well-respected competitor - sometimes teamed with them, sometimes competing with them. But they're a highly complementary business.

Culturally I think we're very well aligned. Our portfolios were extremely complementary. I probably mentioned this to you in our previous interview that, in the air tier where we focused primarily on tankers and transport planes, Link really was focused on fighters and bombers. Where we focused primarily on surface ship training, they focused on subsurface. Where we worked a lot more internationally, they were focused primarily on FMS sales. So we had a really nice fit - fighters to our transports, submarines to our surface ships, our international, nearly 2000 people internationally under Marc-Olivier (Sabourin) that they could tap into. So a highly complementary opportunity. And then one in particular that really gave us critical mass in the United States, the largest single market for us in defence and security. Particularly post-Covid, understanding the advantages of that, that we were all challenged due to Covid, but at least you had one single country. It was a little easier to travel, even with the restrictions, a little easier to execute your program, still gain access to those customers versus the challenges naturally of international, where you had varied amounts of access, very difficult to travel to a much more disparate market space. So we found it a unique opportunity, one that accelerated our strategy and highly complementary, yet very similar in culture, and that was extremely important to us.

MS&T: Did L3 Harris put out feelers that they might be shopping Link?

DG: Well, they certainly had a strategy that was announced at the merger of L3 and Harris back in July of 2019. As you may remember, I was part of L3Harris, legacy L3, not the Link training business, but I was a sister sector president to Lenny (Genna), running their Communication Systems West business. And they had indicated publicly that, upon the merger, they were going to identify core and non-core businesses and look to sell the non-core. Not that I think they were bad businesses; they simply weren't aligned with the more product-focused or communications-focused legacy of Harris and L3. So one organization was put together, and if you took a hard look at it, you can probably figure out what those businesses and, sure enough, they are now being divested. And I think it's nearly complete, that divestment. So I would humbly state, and Lenny would probably back me up, that we got the crown jewel of those divestments in Link. Tremendous business with a pedigree stretching back to Ed Link in the late 1920s and the famous Blue Box. So we were very excited when it came on the market. And I think it's fair to say we had a full-court press and beat out some other potential suitors to purchase them.

MS&T: Is there any plan to use the Link name ongoing?

DG: We're in the middle of a marketing review with some outside expertise, but I'm rather focused on maintaining that pedigree. I think it would be silly to flush that away. We're extremely excited that, as we look at our market, there's really three founding fathers. And now for the first time in history, we have the legacy of those three founding fathers all under one roof. It starts in a timeframe with Ed Link back in 1929, founding Link and that famous Blue Box trainer that was so important in World War Two. In the 1930s, Luther Simjian founded Reflectone, which we purchased in 2001, and that's fundamentally our Tampa business. Merrill (Stoddard) just took that over with the Duke retiring. Simjian was pretty impressive; I think of his 200-plus patents, his last one he received in his early 90s, which is pretty amazing. And then Ken Patrick founded CAE in 1947, a former RCAF officer in the war. So between those three, you have nearly a quarter millennia of experience in training and simulation all under one roof.

And we've actually aligned the three profit-and-loss centers, the three sub-businesses to Defense and Security, appropriately. So Lenny (Genna) is running what we refer to internally as Link, our Texas-based business, which core comes from the legacy Link portfolio. Merrill (Stoddard) is running Simjian in Tampa, the legacy Reflectone business. And then Marc-Olivier (Sabourin) is running our international in Montréal, referred to as Patrick. So we have Patrick, Simjian and Link all focused on portions of the portfolio that were derived from the legacy businesses and in the legacy locations. We're pretty excited about that. I'm a bit of a history geek myself and I take a lot of pride on the fact that we're standing on the shoulders of giants and we're going to honor that legacy and continue to move forward as the only global pure-play, platform-agnostic training and simulation provider in the world. And I think that's exactly where we want to be, and we honor Link, Simjian and Patrick in doing so.

As far as officially how we're going to incorporate Link, that remains to be seen, but certainly we're continuing it within our three businesses.

MS&T: CAE had gone through this back in the late 1980s when they acquired a piece of Link. This was before the Reflectone acquisition. John Caldwell, who was the VP at the time, did some research on retaining the Link name, and what he got largely from the US customers was, ‘We don't care what you call it, as long as you deliver what we ask on time and on budget.’

DG: That certainly is a customer focus, especially back then you're staring down the end of the Cold War and a bit of a murky defense environment. But I think it is important, you've got to understand your history to better focus your future. And we've got quite a history. I think we have a noble mission. That's really what drives the business. Drives our people, drives our culture, and I think that's only enriched when you can look back in history and have that pedigree and have that alignment, when you walk into our business’ lobbies and see that Blue Box, knowing that it was such a core piece of winning the war that it puts a little spring in your step, reminds you of the noble purpose you have every day going to work.

I think that really separates us, particularly from some of our OEM providers that are focused on major platforms, and there's a noble cause in that. But I think the training is an add-on to that. That is not the focus of their business. Obviously, they're looking to sell a fighter jet or a bomber or a ship or a submarine. The training and simulation kind of comes, I hate to say as an afterthought, but it's certainly secondary. Training and simulation is our reason for being; it is exactly what we do. We want to focus all our energies on it as an entire company, not be distracted by platforms, be platform-agnostic and provide simply the best training and simulation to keep the men and women of the US and our allies’ defence and security forces as safe as possible and ensure that they are the best trained that they can possibly be, increasing the chances that they come home safely from an engagement. I've often used that old adage that the more you sweat in training, the less you bleed in battle. And I think that's exactly where we sit. It's what our customers require of us. And I think we've got almost 250 years of combined experience to do that job better than anybody else.

MS&T: CAE has long bucked up against the buy-through-the-prime mentality where the Lockheeds and others by default own the training system and it becomes a make-or-buy decision. What's the current acquisition landscape? Is the market opening up for integrators like yourself or is there still a strong OEM bias in the procurements?

DG: Certainly, with the pivot to a near-peer focus, the emphasis on training, particularly Multi-Domain Operations (MDO), training across all five battlespace domains – cyber, land, air, sea and space - I think gives us a unique opportunity. If we can provide that integrated five-domain MDO training capability, we can really set ourselves apart.

We'll certainly still have OEMs in play. In fact, when I look at the overall addressable market of approximately 35 billion worldwide, about $15 billion in our core and $20 billion in our expansion area of mission and operations support, I would put us second. A very large OEM, not surprisingly, with all those platforms and the advantages that you spoke of, would still be largest in the market. But that position as the world's only global pure-play, platform-agnostic training and simulation business, I think, provides a real advantage because we are focused on only training and simulation and all the new technology that comes with it to address the needs of our customers now that they face, particularly, this near-peer fight. And they can't possibly train in the real world across all five domains, within the timeframes and the cost structures that they now are under, particularly post-Covid, with the impact to budgets. So our focus, I think, really gives us an advantage. And when we look at platforms, next-generation platforms coming faster than ever as a result of this near-peer pressure, it allows us to work with these OEMs and truly partner with them because we're never going to compete with them. I'm never going to be building a plane or a submarine or a ship.

We can truly partner, leverage our engineering and synthetic environment experience in particular from all our investment in digital immersion and take that load off the OEM, take those engineering hours and those IRAD dollar loads off them. But because we're not a competitor, sync our tech roadmaps, work together, share IP for a total solution on things like a Future Vertical Lift or a Next Generation Air Dominance. Name that next-generation platform, we've got the ability to do that. Let's face it, an OEM is probably not going to have that level of partnership with another OEM that competes with them on the platform level.

We also have pressure from small business set asides, a reality of our market that won't change. But how we're addressing it is we're doing a lot more in joint ventures, mentor-mentee relationships with small business. And in fact, (we recently) announced an investment of a partial ownership in Sky Warrior, a small business that works with us in air tier training. So I think you'll see us pressuring both up against the OEMs in that partnership and with our critical mass, particularly in the United States, at over a billion dollars, able to prime the big jobs. Now, because we have that size, that scope, that substance, as well as working more closely and partnering in JVs, as well as partial ownership of small businesses. So we're not just in that integrator lane. That certainly will always be our primacy, working both up and down in the market, if you will, with the OEMs and small businesses.

MS&T: Could you describe the international market that you're looking at?

DG: As we mentioned, Patrick, run by Marc-Olivier (Sabourin), based in Montréal, has over 2000 folks internationally. If you look at my overall portfolio business, coming out of the US now makes up a little less than 70 percent of the portfolio, 30 percent pure international. But if you were to add FMS sales out of the US, it's a little closer to 60/40. Traditionally, what I have seen is a mature defense business has approximately about as much US business as it has international, kind of rest of world in US or about even. So I see some potential to balance that closer to 50/50 as we move forward.

I think Marc-Olivier with his Patrick business has very large, very exciting opportunities internationally. The most obvious of which would be Future Aircrew Training, or FAcT, in Canada. We're part of a joint venture to pursue the follow on, in our backyard, in air tier training, literally our bread and butter. About $10 billion a year lifecycle value and that competition is coming up rather soon. He's got exciting opportunities for more live flight training throughout Europe. We've got a burgeoning Middle East business that has multiple centers and our headquarters in the UAE. There's a lot of opportunity in Saudi Arabia. Many times we're in joint ventures with indigenous companies, particularly to penetrate the Middle East and then Asia. I think we're a bit underrated in Asia, but we've got a couple of hundred folks in Australia and a good core of business and working with some outside consultants to continue the progress, particularly into next-generation platforms into countries like Japan and South Korea. So I'm excited. I see a lot of growth potential. Some of our biggest opportunities in the next one to two years are international, and I have no doubt that we'll have that growth to get that 60/40 split, probably a little closer to 50/50 before too long.

Marc-Olivier Sabourin (M-OS): Dan talked about a level of complementarity between L3 and CAE. I think one which is very obvious and complementary is the fact that L3 or the Link business was very successful at selling some of these weapon platforms through FMS. And CAE has boots on the ground in the international regions. The combination of both businesses together, I think, I'm very hopeful to grow significantly the international footprint. As you know, FMS sales tend to be one-off, meaning you sell the initial systems and then they go silent a couple of years, then come back. Typically, our approach is to follow the customers with services. And that's the approach we’ll take. We can provide also a more seamless experience to end users in international regions in terms of their FMS experience, as opposed to provide products and separate service. We can provide more-or-less turnkey solutions for these customers and accompany them through the lifecycle of the platform that they're using. Increasingly, I think the usability of the platforms, also increasing the amount of technology we can insert an amount of concurrency. We can keep this platform up to date with respect to the weapon system that they're operating.

DG: I think access to the 2000+ international employees that we have based around the world is very exciting, something that Link traditionally hadn't had access to and relied on third parties traditionally.

MS&T: Your competition on the international scene tends to be OEMs, European aircraft manufacturers, that sort of thing.

M-OS: On the international front, there's different kinds. There's three categories. You have, similar to the US, the small companies, although they're not typically mandated as they might be in the US, might exploit a specific niche either from regional content or specific technology on specific opportunities. You have the bigger ones, OEMs. I think the dynamic that we see now with the OEMs is a bit of a change dynamic where we probably are considering partnership in many areas with the OEM as we bring a significant added-value to their pursuits. And you have the mid-range, companies like Thales, like the Spanish company Indra, that are providing similar products than we would - not purely OEM, but they are a division of a bigger company.

MS&T: Let's talk a bit about the threats, the emphasis these days on the near-peer with China and Russia. But given the exit from Afghanistan and the threat, at least, that that will increase terror, does that alter the emphasis at all? How do you see the balance going forward from a procurement standpoint?

DG: That's a great question, Rick. You know, sadly, the loss of 13 brave warriors recently in Afghanistan as part of the exit reminds us that terrorism is not going away. Our defense forces certainly understand that. With the National Defense Strategy-directed pivot to near-peer, I think that absolutely is the right focus. But terrorism was never left behind. When you talk to our customers, they use a term called CRIKT, which stands for China, Russia, Iran, North Korea and Terrorism. So those five priorities continue to include terrorism.

Even as we shifted from what was primarily a ground tier asymmetric fight for the last two decades back to a multi-domain, much more sophisticated adversary in a near-peer fight - for that, terrorism has not gone away. And certainly, if you listen to General Milley's comments recently, this withdrawal, which I think most would agree we've had some difficulty with, reminds us that there are still areas in the world where terrorism is certainly ripe to be a burgeoning threat, even after a few decades of gallantly working against it.

So that brings us back to a multi-domain focus; that terrorism fight has not gone away. But we have to incorporate that with our overall multi-domain operations training. And this really requires digital immersion, that focus on the synthetic environment because particularly, as we've withdrawn from Iraq and Afghanistan and you have less real-world experience, you're going to have to rely more on training. Let's face it, defense departments fundamentally do one of two things: either fight wars or train to fight wars. We are positioning ourselves back into a training mode. And so without that real-world experience, more emphasis on training, particularly under budget constraints and having to focus on all five domains versus one, you're going to have to rely on these virtual capabilities more and more to get the repetition available to these forces so that they can accurately train with regard to both size and scope of that threat. Otherwise, I think we will lose our edge, and that's certainly something that the United States and its allies are not interested in doing.

MS&T: Given some of those budget constraints, do you see more emphasis on digital training and less on the live exercises, or maybe less live in the LVC scheme?

DG: Well, defense budgets typically are the largest portion of any discretionary budget. In the US or allied budgets, we've got a very large debt to pay coming out of Covid; Covid doesn't seem to want to go away, now Delta and new variants. So it's hard to imagine a world where paying that Covid bill won't restrict the largest portion of any discretionary budget, that being defense.

So I think that reality is going to put pressure on live training. We're going to be doing less fighting and more training with the shift to near-peer threats, hopefully for some time. Certainly, I think, everybody hopes we're not in a shooting war with any near-peer soon. The reality is planes, gasoline, MREs, soldiers … that all takes time and a lot of money to not only coordinate for live training, but also to execute. Somewhat reminds me back in the 90s when I was an armor officer and we had the peace dividend. Those cutbacks took us from live training to more training and simulators.

So we see that going a further step. It's not just more training and simulators, but it's training in synthetic environments because it's no longer just one platform in one tier where you're training anymore. It's a coordinated effort across multiple platforms, across multiple battlespace tiers, and really the only way to do that with repetition, every six months, some kind of a national training center type rotation model, is to have a significant portion of it be synthetic. And that's where I'm very excited with the acquisition that, as you look at capability across all five domains, I think Link solidified our position in the air domain. Significantly augmented us in land and sea and then gave us some great entrée into the newest domains, space and cyber. The air fighters and bombers to our transport; the sea, their submarines to our surface ships. But programs like GBSD – Ground-Based Strategic Deterrent  – that they are the training integrator for, and SCARS – Simulators Common Architecture Requirements and Standards , which really takes all 40+ Air Force platforms and integrates them together on a common cyber-hardened network, really gives us more entry into space and cyber within that all-five-domain, multi-domain training environment. So I'm really excited about that because it gives us further capability exactly where our customers demand it in this budgetary environment.

MS&T: How are you seeing that play out in specific procurements? What are some of the major programs coming up that you're targeting?

DG: Well, we've certainly got some very exciting wins like the USSOCOM Mission Command System/Common Operational Picture (MCS/COP), which our Simjian business won a couple of months ago; that integrates input from all five battlespace domains into a single common operating picture to help those decision makers in training and eventually in the real world make the best decisions possible with the utmost information at their hands and eventually augmented by cloud-capable artificial intelligence to help chew through some of that data to help them in their action analysis. We see it in wins like NGA Beyond 3D, our first prime to the intelligence community, where we're providing synthetic environment integration again across all domains.

On large future bids, particularly international, we're seeing integrated centers. We've got an opportunity in Australia, for instance, which is focused on maritime, but it really gets closer to a full synthetic, almost zero time on actual platform training capability that, emanating from the sea, is going to incorporate input across all five. We have similar integrated solutions in the Middle East that we're pursuing. And then when it comes to the United States, I think when you look at the major next-generation platforms, training and simulation is going to be needed, really, before these platforms ever reach the forces,

Let's take Future Vertical Lift, for instance; the cruising speed of the two entrants to Future Vertical Lift is nearly twice the maximum speed of our current platforms. That is such a game changer. We really are going to have to provide the simulation capability years ahead of the platform availability because tactics, techniques, procedures are all going to change. How we train, how we fight is going to be a completely different world with these platforms. Heck, Fort Rucker might not even be big enough because these guys are going to fly right over their firing ranges so quickly. So that simulation capability is going to have to simulate this platform, its breakthrough capability, within a multi-domain fight. So those simulators and particularly that synthetic environment, that digital twin, where we're going to be running through all kinds of scenarios to understand how to train and how to fight with these new paradigm-shift platforms, is going to have to incorporate other domains – ground, space, sea, and the like.

MS&T: Are you getting embedded with any of the OEMs for FLV or other platforms where the simulation you provide might impact the design of the aircraft?

DG: That is certainly a strategic prong of mine, as a pure-play, platform-agnostic provider. I think we're in a unique position to team early with these OEMs, because we'll never compete with them on the actual platform, and start a tech roadmap concurrently with them. Working engineering and IRAD efforts to take that simulation and training piece off their plates so they can focus on the platform. I can tell you that we have agreements with major OEMs in Future Vertical Lift. We're working on NGAD. We're working on next-generation training and simulation in sea. Certainly, things like the air and ground capability of GBSD. We're working FCAS (Future Combat Air System) in Europe.

Are we far enough that our digital twins have modified the platform? No, I don't think we're to that point yet. That certainly would be an end-state that I think would be tremendous, particularly with some of the advantages of our work with labs in places like DARPA, where we're focused on the next generation of simulation, of AI, of synthetic environments, cloud computing, data analytics and sensory immersion, Particularly in the air tier. I could see some capability to modify those platforms or what we're doing on those cutting-edge areas, sensory input to the pilots, for instance, eye tracking to ensure that you know they're looking in the right areas as they're flying. We're doing some pretty neat stuff, particularly with Link on the biometrics front to get the most out of that human-machine interaction. I was at DARPA in the STOW (Synthetic Theater of War) office and it was a great example of the synergies already coming out of the combined businesses. Particularly one PhD named Sandro (Scielzo, Principal Human Systems Scientist) from Link, who's doing some amazing, biometric-infused work on significantly increasing the performance of our training with AI-enabled biometric-capable platforms. In fact, this is an area where Link was ahead of CAE and we're really excited to tap into this and bring what they've been doing, particularly with their platform called ALE and incorporated into our CAE Trax Academy.

Lenny Genna: Coming back to this acquisition of L3 into the CAE family, we were both in pursuit of similar areas and we spent a lot of energy and some of our investment dollars and also academics where we work on universities and what we call adaptive learning. So ALE - Adaptive Learning Engine - how do we measure the students performance? How do we enhance that student's performance, and biometrics is a big part of it. How do we tap the data without interfering with the training that goes on through all different types of sensory inputs and then either get a score back or provide feedback to the student, depending upon what's taking place.

Dan alluded to things like eye-tracking and how important that would be with someone to learn to land on a carrier and scan patterns inside a cockpit. Two students may go through a class the same way and both may graduate, but we can determine how much stress one student may have over another and try to figure out why they're more stressed when performing the same scenario. And maybe there are techniques where we can help that student to reduce that stress level as they go through this process. Biometrics is a key part of it. It also helps for us to standardize; with the pilot shortage today, so how do we leverage, instead of getting rid of instructors, we allow the instructors to have a force-multiplier and these Adaptive Learning Engines or the RISE tool from Trax within CAE, and we bring those both together. We see a key area for us to help in the improvement in the quality and cost effectiveness of training going forward, not only on the military side, but applicability across the board on the civil side as well.

MS&T: How does the CAE Project Digital Intelligence play into all of this? Are you starting to see any early dividends?

DG: We started back in 2019. Marc Parent, our CEO, had a vision for this full-digital immersion and a billion-dollar project to make sure that we were world leaders, as we certainly see this as a key part of the future of training and simulation. This is being continued through Project Digital Intelligence and our recent announcement of Project Resilience, the next billion-dollar commitment in our R&D program.

It's yielded key developments already. We've mentioned Trax Academy pilot training that delivers faster, better, more efficient pilot throughput, specifically through adaptive learning. And I think that only gets better as we integrate aspects of ALE and some of the biometrics and AI that Lenny just spoke of. We're working with the Air Force Pilot Training Transformation Initiative, particularly in helping drive these technologies from our years of research and development into the fighting forces. It's a real focus on artificial intelligence, data analytics, cloud computing, virtual, augmented and mixed reality, and wrapped in cybersecurity. We can't forget that cyber hardening. This is an exciting area when you are a pure play; it's the synergies and resources of my business, Defense and Security; we get to tap into all of CAE, now CAE plus Link, and that total company focus on training and simulation. Because many of these technologies are applicable both to (CAE Group President, Civil Aviation Training Solutions) Nick Leontidis’ civil side in training, obviously with a major focus on pilot training in the air tier as well as defence and security.

So that's the future, digitally immersive solutions using data ecosystems and artificial intelligence not only for defence and security, but leveraging what we're doing in civil aviation and health care, I think is going to be a key discriminator for CAE going forward. And a lot of our partners and customers are seeing that now, particularly as examples of us teaming up on next-generation platforms with the OEMs or doing some really exciting work now as a prime on a lot of different areas with our government customers.

CAE is supporting the Defense Innovation Unit and US Air Force in the Pilot Training Transformation initiative to overhaul undergraduate pilot training. Image credit: CAE.

MS&T: You'd mentioned in previous interviews that Link does a good deal of classified work. How do you see that trend in the future? Is it only going to increase where we don't hear a lot about these programs publicly?

DG: I think I quoted Lenny during the due-diligence process. His quote was something to the effect, ‘The future’s behind closed doors.’ There's no question, particularly with the concern over cyber intrusions from these near-peer threats, that our next-generation platforms are highly classified special access programs. And you have to have the infrastructure of the cleared personnel, the classified lab space, the SCIFs, all that comes with the knowledge to do the work itself. So that was an area very attractive to us in Link. Being a legacy US business, they not surprisingly have done more classified work in the US for longer than we have on the CAE side. When we bought Reflectone in 2001, we did pick up a Special Security Agreement and started doing cleared work at primarily the Secret level. Then a few years ago we bought a small business, AOCE – Alpha-Omega Change Engineering, which really gave us entrée into Top Secret. But as Lenny can attest, a person who started over three and a half decades ago on the B2 program, Link has long done the most classified. And that is a big piece of the future platforms that we have to be a part of. We've got some amazing legacy platforms, but they are legacy and at some point they will sunset, although maybe U2 and things like B-52 will even outlive me; it's pretty incredible.

NGAD, the Future Vertical Lift, Subsurface Nuclear Triad Recapitalization - those things are highly classified. The work at DARPA and the labs is highly classified, so Lenny's business really gives us a bigger capability there, not just people and clearances, but infrastructure and institutional memory and knowledge. And that's so exciting that I've actually elevated the level of FOCI mitigation - Foreign Ownership, Control or Influence - through a Special Security Agreement, which used to just cover the Simjian business, Tampa. Now we’ve elevated that to the entirety of Defense and Security. So my entire business sits within this SSA umbrella that is partially separated to preserve those secrets as per US government guidelines under DCSA (Defense Counterintelligence and Security Agency), but gives the ability all the way up through me to carry a clearance to have those conversations, to walk the classified halls, to see these next-generation platforms, because it really is a huge piece of our future, and our customers require that type of classified protection and access if we're going to be a key piece of these platforms going forward.

MS&T: When CAE bought Link the first time around in the 80s, there was a Special Security Agreement. In those days, foreign ownership of a US defense contractor was almost unheard of. There were all sorts of walls within the organization. One of the programs in Binghamton was the F-117A stealth fighter. Link worked that for 10 years before the Air Force allowed them to even acknowledge it, and that was only about six months after they revealed the aircraft really existed. The day that I put out the press release about the stealth fighter training system, I sent it to headquarters in Toronto for CAE, and I got a call from the Comms VP saying, ‘We always suspected you guys were doing that program. Now we know for sure.’

DG: Yeah, absolutely. It was rather immature. It really wasn't until the late 90s with the advent of BAE systems, the British Aerospace and Marconi coming together, if I remember correctly was 1999, that had a lot of capability for US interests in the classified space that they codified this FOCI mitigation and really had a robust plan to allow foreign ownership to do classified work within the structure of a wholly owned subsidiary that had its own board with an SSA protection, making sure that those secrets are kept and no leverage is used against that US subsidiary.

I think that progression over the last 20 years was a big piece of what is different now with this acquisition of Link that now we do have this codified structure. We can work in the classified space and have a lot more appropriate management and insight into the business while protecting the secret stuff from foreign affiliates. Even though obviously Canada is a Five Eyes partner and there's a lot of stuff that is Five Eyes that we can work on. But that's absolutely key. And again, a big difference from 30 years ago or so when a portion of Link was part of CAE.

MS&T: It sounds like the culture has modified, as well, over that timeframe, because when CAE acquired Link, CAE was actually a smaller entity and there was a lot of resistance within the Link group to even being owned by the Canadians, to the point that they would take a lot of non-classified stuff and kind of hide it from Montréal, pretend that it was classified and that they couldn't know about it. It was a semi-toxic culture in those days, and obviously it didn't last.

DG: When you have such a wall between two entities, invariably you get left hand versus right hand, and you get two further and further separating pieces of the business. And that's where I think this FOCI mitigation through multiple levels of proxy, having that SSA structure allows the appropriate amount of insight, of transparency to make sure the US subordinate and the foreign parent are tracking together or utilizing resources, appropriately removing redundancy where it's smart, particularly in things like the back office, so that you are getting the best product at the best price to those US customers; that is fundamentally necessary. At the same time, protecting those secrets. And as that wall becomes more of a fence, you can be a lot more coordinated. As long as you keep that appropriate amount of contact; on the SSA board, you have inside directors - there's always going to be less of them than outside directors. In our instance, Marc Parent, the CEO, as well as our CFO and our General Counsel, sit on the board in a minority position. So they have board insight into that business, and that's just key to keeping the company together, tracking, coordinating the culture and avoiding, as you said, just entities branching further and further apart that have such a hard wall between them.

MS&T: What's being done to get the employees on board with the merging?

DG: We have an integration management office led by my head of engineering that has over 20 different working groups to ensure that we're doing that cross-pollination. The engineers, sales, execution, P&L are actively working together to bring out that best-of-breed. And the great thing is because we have a cultural fit and a shared passion for the work, it's easy. It's easy to do when you get excited about it and you're talking to other people that also are passionate about what you're passionate about and the ideas just start flowing. One of my best experiences throughout this whole process is just getting in a room with these really smart people and just kind of sparking that innovation discussion, and you can just see them just get rolling as they engage each other and think of an idea: ‘We could incorporate ALE into your RISE platform. For an F-16 simulator, think about how our collimated solution for domes could really help out.’ So you've got examples where Link can help CAE, CAE is helping Link, and that's pretty exciting stuff.