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Understanding the Broad Government Services Buyer Universe

Nearly 450 government services acquisitions have been announced since 2008, averaging ~90 transactions per year.  The vast majority of this M&A activity is transacted at an enterprise range of $100 million or less, and doesn’t generate the significant attention of headline-making, large-scale transactions (e.g., SAIC / maxIT Healthcare, , General Dynamics / Vangent, CGI / Stanley).  In this current budgetary environment, buyers appear to be even less focused on scale, and are placing a greater emphasis on gaining exposure to coveted customer sets (e.g., HHS, VA, Intel) and unique capabilities (e.g., cybersecurity, big data, health IT).

Knowing the M&A desires of the approximately 235 distinct buyers that have participated in government services transactions over the past five years can make the difference between a successful sell-side process with an appropriately sized and targeted marketing outreach, and a potentially failed process where a viable suitor was never contacted. 

Further demonstrating this point, only 19 buyers, or the “Top 8%,”  have made five or more acquisitions during this time period (i.e., at least one acquisition per year) and are what we would perceive as “highly acquisitive” in the government services M&A market.  These can reasonably be assumed as parties that many with at least a working knowledge of the Federal contracting market would recognize as potential buyer candidates. 

However, it is important to recognize these parties only represent 8% of the total buyer universe; and further, that 154 of the 235 buyers only made one acquisition.

Despite relatively consistent industry consolidation over the past five years, the buyer market remains as diverse and selective as ever.  While many business owners may initially expect that the “Top 8%” will demonstrate M&A interest and eventually acquire their business, the reality is that the vast majority of transactions take place with buyers outside of this group.  In this dynamic market environment, buyer M&A focus shifts quickly.  It is important to leverage the resources available, including a knowledgeable advisory firm, should you be planning for, or pursuing a potential sale event to fully vet and ensure access to the appropriate universe of potential buyers.

Contributors: Marc Marlin and Robert Dowling