M&A - Mergers & Acquisitions in Government Contracting

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Jennifer Schaus hosts a series of government contracting events & webinars. Full list & recordings w audio available at http://JenniferSchaus5.eventbrite.com This webinar focuses on M&A in Government Contracting from current valuations to time frames. Bob Dinkel and Rob Tillson of Pierce Capital Partners present. Full audio & slides at: http://www.youtube.com/watch?v=YA6FTq1q2D4

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M&A - Mergers & Acquisitions in Government Contracting

  1. 1. Mergers & AcquisitionsIn Government Contracting
  2. 2. Mergers & AcquisitionsIn Government Contracting• Agenda– Introductions– Presentation– Q & A
  3. 3. Mergers & AcquisitionsIn Government Contracting–Introductions:• Fed Bid Speed• Fierce Government• Bob Dinkel / Rob Tillson – Pierce Capital Partners• Jennifer Schaus – Jennifer Schaus & Assoc.
  4. 4. Mergers & AcquisitionsIn Government Contracting• Fed Bid Speed* Software program to manage B2G Opps* Single click integration with FBO.gov* Share notes & project manage RFP’s
  5. 5. Mergers & AcquisitionsIn Government Contracting• Fierce Government* Free Govt IT Newsletter* IT in Govt Agencies / Defense / Cloud / Cyber* White Papers / Events / Analysis* In-depth & Quality = Differentiator
  6. 6. Mergers & AcquisitionsIn Government ContractingPierce Capital PartnersFounded 1988Team of experienced Gov Con Experts:Fed Results, SAIC, CACI, GE, etc.Services Include:M&A, Private Equity & Debt PlacementJV, Buy OutsAdvisory Serviceswww.PierceCapitalPartners.com
  7. 7. Mergers & AcquisitionsIn Government Contracting• Jennifer Schaus & Associates• B2G Services and EventsGSA SchedulesFederal Sales / MarketingFull Series of GOV CON WEBINARS:http://JenniferSchaus5.eventbrite.com
  8. 8. Mergers & AcquisitionsIn Government Contracting
  9. 9. Mergers & AcquisitionsIn Government ContractingWhat is the Current Market?
  10. 10. Mergers & AcquisitionsIn Government ContractingWhat Is The Current Market?Valuations have declined – 3-5x EBITAAcquisitions must be accretive to EPSMust provide:* new client or new contract vehicle* competitive technology* high % of Prime work
  11. 11. Mergers & AcquisitionsIn Government ContractingWhat Is The Current Market?Wells FargoHIGHLIGHTS OF THE WEEK--Government Services. As we had been expecting, growthcontinues 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, andpricing 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 moremuted. CACI (CACI) reported disappointing FQ3 revenue, trimmed June quarter revenue guide, andsuggested slower organic growth likely in FY13 (June). ManTech (MANT) missed revenue and EPSexpectations and lowered its outlook again, although our view is that the new forecast is still too optimisticgiven the upcoming grow-over of supporting the war-fighter. Civilian agency-focused ICFs (ICFI) Q1 was atouch light, but 2012 guidance was held. Small-cap NCI (NCIT) reported in-line Q1, but highlightedupcoming challenges as it works to refocus/rebuild its new business machine.
  12. 12. Mergers & AcquisitionsIn Government ContractingWhat are the Valuation Metrics?(related to government contractors – IT sector)
  13. 13. Mergers & AcquisitionsIn Government ContractingValuation MetricsCustomers 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.
  14. 14. Mergers & AcquisitionsIn Government ContractingValuations Lower in 2012-3Security Clearance/Intel = 9 - 10x TTM EBITALarge > $500M = 5 - 7x TTM EBITAMid $250-$500M = 4 - 6x TTM EBITASmall < $250M = 3 - 5x TTM EBITANOTE: Health IT, Cyber, Info Assurance, Geospatial, Energy will raise valuation
  15. 15. Mergers & AcquisitionsIn Government ContractingWhat Is the Process?
  16. 16. Mergers & AcquisitionsIn Government ContractingThe Process – PART 1Prepare a “Book” & Offer MaterialsContract WaterfallFinancial ForecastKey Personnel ProfileResearch & Contact probable / acceptable purchasersSend NDA & “Book”
  17. 17. Mergers & AcquisitionsIn Government ContractingThe Process – PART 2Pierce determines responders ability to payManagement meetingsNegotiate & Select LOINegotiate Purchase Agreement
  18. 18. Mergers & AcquisitionsIn Government ContractingPreparing For The Sale
  19. 19. Mergers & AcquisitionsIn Government ContractingPreparing For The SaleFinancial 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.
  20. 20. Mergers & AcquisitionsIn Government ContractingThe ClosingIntegration of company structure / cultureEscrow releaseRetain key personnelAdvise on earn-out provision
  21. 21. Mergers & AcquisitionsIn Government ContractingTime FramesPreparation: 30 - 45 DaysMarketing: 30 - 45 DaysClosing: 45 Days
  22. 22. Mergers & AcquisitionsIn Government ContractingConclusions
  23. 23. Mergers & AcquisitionsIn Government ContractingConclusions & Strategies:Get your house in shape earlyIdentify your valuePartnersCompetitorsKeep your eye on the businessOverall company considerations
  24. 24. Thank You !!!!!Please submit questions here …....The webinar is recorded &will be available for download.Thank you for your time!
  25. 25. Mergers & AcquisitionsIn Government ContractingJennifer Schaus & AssociatesJSchaus@JenniferSchaus.comwww.JenniferSchaus.com+ 1 – 2 0 2 – 3 6 5 – 0 5 9 8Bob Dinkel5 7 1 – 9 3 4 – 6 1 3 1bdinkel@piercecapitalpartners.comRob Tillson7 0 3 – 6 5 2 – 4 5 1 2rtillson@piercecapitalpartners.com

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