M&A - Mergers & Acquisitions in Government Contracting

Mergers & Acquisitions

In Government Contracting

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Mergers & AcquisitionsIn Government Contracting

• Agenda

– Introductions– Presentation– Q & A



– Introductions:• Fed Bid Speed• Fierce Government• Bob Dinkel / Rob Tillson – Pierce Capital Partners

• Jennifer Schaus – Jennifer Schaus & Assoc.



• Fed Bid Speed* Software program to manage B2G Opps

* Single click integration with FBO.gov

* Share notes & project manage RFP’s



• Fierce Government* Free Govt IT Newsletter

* IT in Govt Agencies / Defense / Cloud / Cyber

* White Papers / Events / Analysis

* In-depth & Quality = Differentiator



Pierce Capital PartnersFounded 1988

Team of experienced Gov Con Experts:

Fed Results, SAIC, CACI, GE, etc.

Services Include:

M&A, Private Equity & Debt Placement

JV, Buy Outs

Advisory Services

www.PierceCapitalPartners.com



• Jennifer Schaus & Associates• B2G Services and Events

GSA Schedules

Federal Sales / Marketing

Full Series of GOV CON WEBINARS:

http://JenniferSchaus5.eventbrite.com

http://jenniferschaus5.eventbrite.com/


Mergers & Acquisitions In Government Contracting



What is the Current Market?



What Is The Current Market?Valuations have declined – 3-5x EBITA

Acquisitions must be accretive to EPS

Must provide:

* new client or new contract vehicle

* competitive technology

* high % of Prime work


What Is The Current Market? Wells Fargo

HIGHLIGHTS OF THE WEEK--Government Services. As we had been expecting, growth

continues to decelerate and margin has become more difficult to maintain for those supporting the U.S. federal government as funding remains tight, clients reluctant to make decisions and deploy funds, and pricing pressure intensifying. With the fall elections, expected start of GFY2013 under continuing resolution, and the uncertainty of whether the “sequestration” will be reversed, forward commentary was even more muted. CACI (CACI) reported disappointing FQ3 revenue, trimmed June quarter revenue guide, and suggested slower organic growth likely in FY13 (June). ManTech (MANT) missed revenue and EPS expectations and lowered its outlook again, although our view is that the new forecast is still too optimistic given the upcoming grow-over of supporting the war-fighter. Civilian agency-focused ICF's (ICFI) Q1 was a touch light, but 2012 guidance was held. Small-cap NCI (NCIT) reported in-line Q1, but highlighted upcoming challenges as it works to refocus/rebuild its new business machine.


What are the Valuation Metrics?(related to government contractors – IT sector)



Valuation Metrics

Customers in Agency w growing budgets &/or high barrier to entry;Strong management team;Revenue size & growth;High operating margins;Valuable IP;High-end skills & high hourly rates;Full & open contracts – vs – set-asides;“Hot” technology.



Valuations Lower in 2012-3 Security Clearance/Intel = 9 - 10x TTM EBITA

Large > $500M = 5 - 7x TTM EBITA

Mid $250-$500M = 4 - 6x TTM EBITA

Small < $250M = 3 - 5x TTM EBITA

NOTE: Health IT, Cyber, Info Assurance, Geospatial, Energy will raise valuation



What Is the Process?



The Process – PART 1

Prepare a “Book” & Offer Materials

Contract Waterfall

Financial Forecast

Key Personnel Profile

Research & Contact probable / acceptable purchasers

Send NDA & “Book”


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The Process – PART 2

Pierce determines responders ability to pay

Management meetings

Negotiate & Select LOI

Negotiate Purchase Agreement



Preparing For The Sale



Preparing For The Sale

Financial Audit – 3 yrs;

Legal Structure - Stock, Employee, ESOP;

Internal Control – Tax Filings, etc;

Minimize Set-Aside revenues; Restate “add backs”;

Develop 3 year sales & EBITA projections.



The Closing

Integration of company structure / culture

Escrow release

Retain key personnel

Advise on earn-out provision



Time Frames

Preparation: 30 - 45 Days

Marketing: 30 - 45 Days

Closing: 45 Days


Conclusions


Mergers & Acquisitions In Government Contracting

Conclusions & Strategies:

Get your house in shape early

Identify your value

Partners

Competitors

Keep your eye on the business

Overall company considerations


Thank You !!!!!

Please submit questions here …....

The webinar is recorded & will be available for download.

Thank you for your time!

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Jennifer Schaus & [email protected]

www.JenniferSchaus.com+ 1 – 2 0 2 – 3 6 5 – 0 5 9 8

Bob Dinkel5 7 1 – 9 3 4 – 6 1 3 1 [email protected] Rob Tillson7 0 3 – 6 5 2 – 4 5 1 2 [email protected]

mailto:[email protected]

mailto:[email protected]


M&A - Mergers & Acquisitions in Government Contracting

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Transcript of M&A - Mergers & Acquisitions in Government Contracting