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Federal Contractors Mergers and Acquisition Outlook for 2009

The economic climate, credit crunch and uncertainty surrounding the nation’s new administration has a lot of government contractors on the edge of their seats. Well, I just ran across some data and analysis that could help these businesses better understand the lay of the land. It comes from Paul Serotkin of the firm Venture Management and was published in their Federal Growth Report newsletter. (By the way, if you don’t get this newsletter you’re missing a well-respected source of industry information from some very savvy folks.)

The report is well worth reading in its entirety, but here are a couple of points that caught my attention. The overall M&A market slowed in 2008 and is expected to remain soft for 2009. No big surprise there. Exchange rates have hit international transactions especially hard. Larger services companies are relatively underleveraged and flush with cash, so they are more likely to be buying than are mid sized pure play firms.

Private equity groups are a bright spot and should have their checkbooks out this year. What will sell well? Here the nod goes to companies who have a strong strategic position (growing market and a competitive advantage). So if you are counting on small biz set asides to boost your value you may be in for some disappointment. This outlook is very consistent with our study of companies that sell at premium multiples. Well-positioned companies sell well in good times and bad.

Enjoy Paul’s report and don’t forget to sign up for their newsletter.

 

Author: Lee Frederiksen, Ph.D. Who wears the boots in our office? That would be Lee, our managing partner, who suits up in a pair of cowboy boots every day and drives strategy and research for our clients. With a Ph.D. in behavioral psychology, Lee is a former researcher and tenured professor at Virginia Tech, where he became a national authority on organizational behavior management and marketing. He left academia to start up and run three high-growth companies, including an $80 million runaway success story.

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