Acquisition terms are worth their weight in gold

There also has been an increased use of earnouts, escrows and holdbacks to mitigate risk caused by the transfer of set-aside contracts and valuations based on projected continued strong growth of the target company and in situations where there are contract or legal issues.Every transaction of a privately held company involves detailed representations and warranties and indemnification by the sellers. The negotiation of these terms has become increasingly detailed and sophisticated.The other major focus of buyers of federal services companies is on contractual provisions to ensure that the intellectual capital of the seller is retained by the buyer.Customarily, retention agreements are entered into by the seller with his key employees before closing and approved by the buyer.Sellers want to reward key employees, and buyers want to retain them and restrict their ability to compete with them.As a result of a lot of experience with these retention agreements during the past 10 years, the language and mechanisms employed for retention have become increasingly sophisticated.The way to obtain the most favorable terms and conditions in a government contractor's M&A is a controlled auction, in which the company for sale has a detailed and accurate offering memorandum presented by its M&A advisers to the most strategically motivated buyers at the appropriate decision-making level.The use of a virtual data room for the final three to five potential buyers gives them the detailed information they need to submit a detailed offer that includes most of the key terms and conditions that would ordinarily be negotiated in the purchase and sale agreement.This mitigates the risk and expense for the buyer and allows the seller to compare not only the purchase price and valuation from the finalists but also the criticaland equally important terms and conditions.The use of qualified and experienced advisers for both sellers and buyers has never been more important than it is today.