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From the Desk of Bernard Mustafa
Government Contractor M&A Market Still Robust, says BB&T's Knop
Knop said, "Consolidators in the Defense and Government Services sector have created tremendous shareholder value. The merger and acquisitions strategy has helped build tremendous value in the market and are a key component for growth in larger government contractors." Private Equity Groups have shown tremendous interest in the Government Services market and now account for a significant share of M&A transactions. Interest has also increased from foreign buyers.
Some highlights from the presentation included:
- While the universe of public companies focused on Government customers (government contractors) outperformed the broader markets through mid-2006, these companies have experienced increased volatility since as funding to support the Iraq conflict has affected budgets in the GTS universe.
- Public company valuations in the GTS sector have been volatile over the past 12 months, but have outperformed the S&P 500 as they tend to have a low correlation to the overall markets.
- Deal volume in the Defense and Government Services market has been robust during the past several years, driven by strong defense spending, access to capital, a strong supply of attractive acquisition targets, and a dramatically increasing universe of buyers.
A prevailing theme was the rising need for due diligence preparation and having systems and processes in place to ensure that all pertinent accounting and contract data is available when needed. Many of our fast-growing government contractor clients have exit aspirations and move from QuickBooks or GCS Premier to the Microsoft Dynamics NAV platform to get a more comprehensive financial outlook and management reporting structure in place. In some cases, moving to a more comprehensive financial management platform happens 3-5 years before the expected event.
CEO, Pleasant Valley Business Solutions
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| Strategies to Help Prepare for Credit Market Changes |
This article was submitted by Michael Marsden, Vice President
Wells Fargo Business Credit-Government Services Group (McLean, VA). Marsden can be reached at 703.462.2313 or michael.a.marsden@wellsfargo.com.
During current market conditions, many government contractors utilize the financial leverage found in credit as the main source of capital to fund their growth. The state of the credit markets will most often move in tandem with the general economy, so when the general economy softens, as it appears to be currently, the availability of credit typically tightens. Thus, companies need to be continually aware of the dynamics of the credit markets so they can manage risks that arise from the uncertainty of credit availability during downturns in the credit cycle.
Sources of Capital
The overall sources of capital for loans have changed quite dramatically. According to the Wall Street Journal, today, institutional investors provide roughly $2 for every $1 provided by more traditional lenders, including banks. In 2002, that ratio was markedly different as traditional lenders provided $4 for every $1 provided by institutional investors. Many institutional lenders have little to no experience in managing loans through a credit market downturn. (More) |
House Votes Broad Contracting Changes that Will Impact Sole-Source and Cost-Plus Contracts |
This article was submitted by Warren Corbett, Business Research Services Inc. (Bethesda, MD), publishers of Set-Aside Alert. Subscription information can be found at www.setasidealert.com.
The House has approved far-reaching changes in contracting rules as part of the 2009 Defense authorization bill.
The "Clean Contracting" amendment requires agencies to minimize the use of sole-source and cost-plus contracts and mandates that all contractors on multiple award contracts be given a fair opportunity to bid on task orders. The bill would impose a three-year moratorium on public-private job competitions in the Defense Department, and directs the Army to adopt contracting changes recommended by the Gansler Commission. Those recommendations include putting general officers in charge of procurement, allowing expedited hiring authority for acquisition personnel, and creating a fund to train the acquisition workforce. The Army has already begun implementing some of the changes. (More details on the specifics of the bill.)
(Set-Aside Alert is published 25 times a year by Business Research Services, Bethesda MD. For more info, www.setasidealert.com 800-845-8420)
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| SmartPay and SmartPay2 Make it Easier for Agencies to Buy |
This article was submitted by Wade Tetsuka, Executive Vice President and Susan Otim, Account Manager, Diamond Mind, Inc. (888) 566-0945 ext. 705.
Companies selling to the Government still have a chance to increase booked revenue opportunities for this year. Remember two important dates (September 30 and November 30, 2008), and take a couple of simple steps to make it easier for the Government Agencies to choose you over your competitors.
First, September 30, 2008 fiscal year end of the federal government is rapidly approaching. Government Contractors should look to set up Level III capability for Purchase Card ("P-Card") acceptance as soon as possible. In August and September, government agencies are looking to spend their final appropriations for the fiscal year which invariable leads to a substantial spike in P-Card spending.. Providing Level III data reduces costs and improves cash flow, while P-Card acceptance in general increases your chances for micro-purchase revenue (up to $3,000 per transaction). (More) | |
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Sincerely,
Bernard
Pleasant Valley Business Solutions
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| Wash Tech Publishes Annual Top 100 List |
Washington Technology published its annual Top 100 Government Contractor list, which featured Lockheed Martin ($13.5B in government contracts), Boeing ($9.7B), and Northrop Grumman ($7.9B) at the top. The top 100 contractors are profiled on the Wash Tech site.
Wash Tech editor Nick Wakeman turns in a nice article talking about the challenges contractors face to stay on the list year after year. He also compares this years list to the Top 100 of 1994. "Of the companies in the top 10 in 1994, only Boeing Co., EDS and CSC remain in that group today. Science Applications International Corp., is close. They were No. 11 in 1994 and are No. 5 today."
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| About Dynamics NAV |
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Microsoft Dynamics NAV for Government Contractors from PVBS is an ERP solution that has been designed specifically for companies that provide services and/or sell products to the Federal Government. It features:
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Project Accounting
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Web Based T&M
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Inventory Control
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Order Processing
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Fulfillment
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Warehouse Management
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Human Resources
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Financial Management
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Business Intelligence
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Analytics
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CRM
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