News & Events

YTD M&A Recap – Deal Volume Up, But a Long Way to Go


There is considerable buzz in the marketplace about activity, with rumors abounding about potential public government and defense firms exploring strategic alternatives (e.g., Mercury Systems), as well as an expectation of continued divestitures (e.g., QinetiQ’s divestiture of its U.S. Services Division), as companies realign and refocus their growth strategies.  Additionally, temporary clarity around the budget has helped to mitigate the lingering uncertainty around future spending which, among other things, hindered deal activity in 2013.  However, despite the buzz, the number of deals consummated remains below historical levels. 

There are several notable trends in government technology solutions M&A for January – April 2013 and 2014.  There have been 24 announced transactions in 2014, as compared to 18 during the same period of time in 2013.  Viewed on a standalone basis, an additional six deals one-third of the way through 2014 may not seem hugely significant; however, it is certainly worth noting the timing of such deals when viewed on a year-over-year basis.

Of the 18 deals in January – April 2013, nine were announced during January.  With the significant push to market experienced in 2012 for tax reasons, it’s safe to assume this number is a bit inflated, as several deals spilled over into 2013.  Given that context, the pickup shown in 2014 looks markedly stronger –February – April activity is up more than 100%, with other deals in the market nearing completion.

Another positive sign for government M&A can be seen in the types of acquirers active in the marketplace.  While 2013 primarily saw privately owned companies active on the M&A front (public defense and government technology companies accounted for less than 20% of acquisitions), the first four months of 2014 have shown a pickup in public buyers as well.  Of the 24 acquisitions referenced above, 8 of these (33%) have involved a public buyer – notable examples include ManTech’s acquisition of VA T4 contract holder 7Delta; Jacobs Engineering acquiring expertise in classified communications systems via Verizon’s Federal Network Services business; and Sapient increasing its government presence through its purchase of OnPoint Consulting.

While each of these trends suggest an improved year of M&A, it’s important to note there is still a long way to go.  Additionally, while annualized deal volume of ~74 transactions would show a nice uptick relative to 2013’s activity, it still falls short of the ~85 – 100 deals which had been the norm for government technology solutions M&A for the previous 10 – 15 years.