Key Building Blocks to Creating Value
These are tumultuous times for contractors, defined by the necessity for companies to adapt to tightening federal budgets, continued contract and procurement delays, escalating oversight and OCI concerns, and insourcing initiatives – all within a backdrop of clear priority areas for federal funding and M&A transactions (e.g., intelligence, cybersecurity, healthcare, C4ISR, energy).
Government services companies’ attempts to supplement financial performance through acquisition has placed heightened focus on growth and profitability; however, these metrics are merely the result of a tightly run organization with the proper infrastructure, processes, focus, and management team in place.
Select key building blocks of M&A value:
- Strategic Planning / Setting Objectives – Establishing a framework of the short- and long-term objectives of key stakeholders narrows the strategic focus of a company’s operations on well-defined capabilities, customers, and milestones, as well as establishes a clear understanding of required current and future investments.
- Focus / Depth / Identity – The government services acquisition market has shifted away from size and breadth, and toward focus and depth of companies’ capabilities and customers.
- F&O / Prime Contracts – The June 2007 change in recertification requirements has shifted M&A dynamics such that a smaller revenue provider with F&O contracts can be worth more than a larger contractor with significant set-aside exposure.
- Infrastructure, Processes, and Talent – A strong infrastructure better positions a company to detail strong forecast visibility and margin sustainability, driving incremental value by mitigating financial performance risk. In addition, retaining and attracting key personnel is fundamental to generating strong growth and distinguishing a company as a coveted asset with significant upside potential.