Mergers & Acquisitions In Government Contracting

Mergers & Acquisitions In Government Contracting

Agenda
Introductions Presentation Q&A

Mergers & Acquisitions In Government Contracting Introductions:

Fed Bid Speed Fierce Government
Bob Dinkel / Rob Tillson Pierce Capital Partners Jennifer Schaus Jennifer Schaus & Assoc.

Mergers & Acquisitions In Government Contracting

Fed Bid Speed
* Software program to manage B2G Opps * Single click integration with FBO.gov * Share notes & project manage RFPs

Mergers & Acquisitions In Government Contracting

Fierce Government
* * * * Free Govt IT Newsletter IT in Govt Agencies / Defense / Cloud / Cyber White Papers / Events / Analysis In-depth & Quality = Differentiator

Mergers & Acquisitions In Government Contracting

Pierce Capital Partners
Founded 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

Mergers & Acquisitions In Government Contracting

Jennifer Schaus & Associates

B2G Services and Events
GSA Schedules Federal Sales / Marketing Full Series of GOV CON WEBINARS: http://JenniferSchaus5.eventbrite.com

Mergers & Acquisitions In Government Contracting

Mergers & Acquisitions In Government Contracting

What is the Current Market?

Mergers & Acquisitions In Government Contracting

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

Mergers & Acquisitions In Government Contracting

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.

Mergers & Acquisitions In Government Contracting

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

Mergers & Acquisitions In Government Contracting

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.

Mergers & Acquisitions In Government Contracting

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

Mergers & Acquisitions In Government Contracting

What Is the Process?

Mergers & Acquisitions In Government Contracting

The Process PART 1
Prepare a Book & Offer Materials
Contract Waterfall Financial Forecast Key Personnel Profile Research & Contact probable / acceptable purchasers Send NDA & Book

Mergers & Acquisitions In Government Contracting

The Process PART 2
Pierce determines responders ability to pay Management meetings Negotiate & Select LOI Negotiate Purchase Agreement

Mergers & Acquisitions In Government Contracting

Preparing For The Sale

Mergers & Acquisitions In Government Contracting

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.

Mergers & Acquisitions In Government Contracting

The Closing
Integration of company structure / culture Escrow release Retain key personnel Advise on earn-out provision

Mergers & Acquisitions In Government Contracting

Time Frames Preparation: 30 - 45 Days Marketing: 30 - 45 Days Closing: 45 Days

Mergers & Acquisitions In Government Contracting

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!

Mergers & Acquisitions In Government Contracting

Bob Dinkel 5719346131 bdinkel@piercecapitalpartners.com Rob Tillson 7036524512 rtillson@piercecapitalpartners.com

Jennifer Schaus & Associates JSchaus@JenniferSchaus.com www.JenniferSchaus.com +12023650598