Market challenges remain in 2014

When you hold your investor conference in early January, it’s a natural fit that people make predictions about the coming year.

And so it was this week at Raymond James’ 13th annual Government Services and Technology Summit, where a mix of company executives and investment banker and lawyer types talked about their companies and the market in general.

With the recent budget deal in place, the mood was definitely better among these folks then a year ago, but as CACI International’s chief financial officer, Tom Mutryn, pointed out, many underlying issues were not addressed in the deal struck in December.

“I don’t expect 2014 and 15 to be materially different than 2013,” he said. “Budget pressures will continue, procurement policies and pricing pressures will continue.”

In other words, 2014 won’t be a cake walk. “There will be challenges to growth,” Mutryn said.

I think that will be particularly true the first six months of the year because we saw such a slowdown in the issuance of request for proposals in 2013.

Because this was an investor conference, there was a lot of talk about mergers and acquisitions, and 2013 was definitely an off year.

“There were a lot of busted deals last year,” said Randy Phillips, who until recently was chief strategy officer for TASC. He’s now with the Chertoff Group.

Other than a few exceptions, such as CACI’s acquisition of Six3 Systems, there weren’t a lot of quality properties for sale last year, he said. What sellers were willing to sell for was also out of whack.

But with the clarity of the budget deal, more deals should get done in 2014.

“Sellers need to decide, 'how long do I hold on' or 'do I want to punch out and find a partner',” he said.

Tim Garnet, managing director at Avascent, a management consulting firm, described 2014 as a moving year.

“Who is going to step up and show some leadership?” he asked.

As tough as 2013 was, the uncertainty in the market as provided cover for poor performance. That will be gone in 2014.

“I think we’ll see more separation between the winners and the losers,” he said.

His comment reminded me about what my grandfather used to say about certain jobs on the farm. They were separators because they separated the men from the boys.

Brian Gesuale, senior research analyst with Raymond James, said he’ll be looking for signs of organic growth in the market, but he agreed with others that organic growth will be difficult.

It might be best to look for signs that organic growth is coming in the future, but maybe not this year.

For Phillips, 2014 might just be the time to be aggressive despite all the negative pressures in the market.

He quoted World War I Gen. Ferdinand Foch: My center is giving way, my right is retreating, situation excellent, I am attacking.

I like that attitude, and it should make 2014 an interesting year, indeed.