Is it back to the future or survival of the fittest in the government market?

How do you ride out the current budget conditions and position your company for growth? Finding the right answer is the top challenge in today's market, writes Editor Nick Wakeman.

One of the challenges of trying to summarize a market outlook event is deciding which theme to pick. And when you are talking mergers and acquisitions trends there are plenty to pick up from.

In the case of Morrison-Foerster’s 7th annual federal M&A Outlook event, I’m identifying three themes as:

     •  Back to the future.
     •   The need for focus.
     •   Weathering the storm.

These are my descriptions, not anything any of the speakers at the Oct. 25 event used. In the interest of full disclosure, Washington Technology was one of the co-sponsors of the event along with Ernst and Young.

The consensus among the speakers is that companies are focused on surviving today's tough economic conditions and market uncertainty, but they also are active as they position themselves for growth when the market improves.

Several of the panelist described today’s M&A activity is similar to the mid to late 1990s.

Now, like then, “a lot of companies are focused on getting smaller in order to grow,” said Jean Stack, a managing director with Houlihan Lokey and a Washington Technology columnist. (She also went to Duke University, my wife’s alma mater. Go Devils!)

Stack’s point is that companies are shedding non-core and slow-growing businesses. This frees resources and management’s attention to focus on faster growing parts of the business and make acquisitions in faster growing segments of the market, she said.

Portfolio shaping is a much more important driver for divestitures today than organizational conflicts of interest, which two years ago was the critical factor, Stack said.

However, there is an important difference between the 90s and today, said Greg Van Beuren, managing director at Bluestone Capital Partners. There is no talk of a peace dividend today, he said. “The threat environment is much more complex.”

Ed Caso, managing director and senior analyst with Wells Fargo Securities, began the morning session with an assessment of Wall Street’s view of the government market.

There is good, bad and ugly news, according to Caso. The good: growth in areas such as cybersecurity, mobile technologies and cloud computing, but there is also bad and ugly. The bad includes the need for companies to reposition themselves for new spending priorities and slow organic growth.

The ugly includes the deficit negotiations, the recurring continuing resolutions and the “value-add” from Congress. “They can mess up more things,” Caso said. “It’s the danger of unintended consequences,” he added. 

Whether it is pursuing contracts or the next acquisition, focus is critical, said Walt Havenstein, CEO of Science Applications International Corp.

“We turned down probably 140 acquisitions in the past year and looked at a couple hundred more to get the deals we made,” he said.

The first step in picking an acquisition to pursue is whether it is a strategic fit for the company.

Companies make mistakes when they do deals that aren’t a strategic fit. “When you buy something that is outside what you do, you better buckle your chin strap,” Havenstein said.

The big question for companies is where do they need to be to survive these hard times and be well-positioned when the market improves.

Bob Kipps, founder and managing director of the investment bank KippsDeSanto, likened it to the real estate market.

“It’s all about location, location, location,” he said. “The companies in the good parts of the market will continue to do well.”

The good neighborhoods, by consensus of the speakers, are:

     •  Cybersecurity
     •   Data Analytics
     •   C4ISR
     •   Health IT
     •   Cloud computing
     •   Mobile and social media
     •   Energy
     •   Cost savings and efficiency efforts

If you are looking to sell your company and you are in one of those areas, you should have plenty of buyers. If you’re not, your deal might not get done.

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.