What You Need to Know about Today’s GovCon M&A
Highlights from the PSC Annual Conference M&A Panel |
President and CEO, Boscobel Marketing Communications
It’s a new merger and acquisition (M&A) market for GovCons. Following a dip in activity between 2012 and 2016, the market has significantly rebounded. 2017 was a strong year and the first four months of 2018 saw even more GovCon hardware and systems transactions than the same period last year. But the field has changed. There are new sellers at the table, buoyed optimism and a range of viable seller company profiles.
That’s what I learned by attending the excellent M&A panel discussion at the recent 2018 Professional Services Council’s (
PSC) Annual Conference at The Greenbrier Resort in West Virginia. Led by astute facilitator
Bob Kipps, Managing Director at
KippsDeSanto & Co., the panel brought to life a vibrant, active GovCon market that’s suddenly “in vogue” again!
In case you weren’t in the room for this year’s popular M&A panel, here are seven key takeaways:
1.
Buyers are Optimistic. With a multiyear appropriations’ bill passed, a relatively stable economy and strong lending available, buyers are feeling more confident about the long-term prospects for M&A. More buyers are actively seeking M&A opportunities.
2.
Tech Advancement is Driving Interest. Government is eager to adopt technologies that are proven to work in the commercial market. Agencies want commercial off-the-shelf (COTS) technologies that can help to better attract and retain workers, improve citizen engagement, effectively combat security concerns and drive operational efficiencies. Sellers with automation, artificial intelligence and specialty cybersecurity capabilities, for example, are desirable M&A targets.
3.
GovCon Market is Attracting New Buyers. With the GovCon vertical back in favor, new and different buyers are emerging. In addition, the traditional GovCon buyers, private equity and venture capital firms that are new to government are also stepping up. Increasingly, Alaskan and Native American companies are also at the table. There are more types of buyers and a higher number of buyers in each market, creating a broader and deeper pool of interest.
4.
More Sellers are Sellable. On the seller side, a number of factors are driving near-term exits. Sellers who have been holding off since 2012 are encouraged by current conditions, releasing pent-up M&A demand. Also, the preponderance and variety of buyers creates more potential options for some small businesses and other set-aside companies.
5.
Flood of Major IDIQ Awards Prompts Activity. Companies that did not win recent multiple award indefinite delivery indefinite quantity (IDIQ) contracts are highly motivated to purchase companies that did. Acquiring companies is one way to get on GSA Alliant 2, Army RS3, DISA Encore III or other desirable government contract vehicles.
6.
Prices are More Disparate Now. When private equity firms evaluate a potential seller, valuations across the firms are still fairly consistent. What’s different in this market is the number and types of strategic buyers. Depending on what strategic buyers see in potential acquisitions, valuations fluctuate considerably from one to the next.
7.
2018 Market Conditions. There’s no doubt that we’re in a positive cycle, now, for GovCon M&A. Still, the basic underpinnings of M&A haven’t changed. Before sellers make any moves, they need to put their business “house” in order. Even the best market won’t overcome undesirable business deficiencies.
In a nutshell, if you haven’t been in the GovCon M&A market lately, you probably don’t know all the players. If you are in, you’re in good company!
Fascinating! It’s no wonder that this panel, presented on the last morning of PSC’s three-day event, was packed with attendees. The topic, an expert panel and Bob’s insights all created staying power for the final day. Nice job! And thank you for the update, Bob!
About Joyce Bosc
Joyce Bosc is president and CEO of the public relations firm Boscobel Marketing Communications. Boscobel was the first digital marketing and public relations firm to specialize in the federal market and one of only a few to offer M&A communications plans and services. Learn more at
www.Boscobel.com and
download the “Stakeholder Communications in an M&A Environment” white paper. Follow Joyce at
@JoyceBosc and connect with her on
LinkedIn.
About Bob Kipps
Bob Kipps has over 20 years of experience in providing M&A advice to leading aerospace, defense and technology firms.
KippsDeSanto & Co. was founded in 2007 and has grown to 25 professionals – the largest investment bank exclusively focused on the aerospace, defense and government services sector. Over the years, KippsDeSanto has worked with some of the most successful industry firms advising them on their strategy as they grow and assisting them with their eventual sale.