How small businesses can think through megadeal trend

The mega deals get all the attention and involve the biggest players in the market but small businesses have plenty to think about as the market is reshaped.

Even a cursory look at our coverage of the government market’s merger-and-acquisition activity over the past two years could lead the casual observer to think this: the big are getting bigger.

Then of course there are those in the vast, somewhat opaque middle tier of the market looking to make that jump into the upper echelon through deals to add scale and new customer bases in hopes of creating a platform for further growth.

So how do small businesses navigate a world that seems to show deal after deal for size? Particularly in their own environment of set-aside contracts and the need to progress to full-and-open work to entice potential buyers if and when they wish to sell?

Erin Andrew, managing director of government contract lending at Live Oak Bank, said M&A transactions are certainly an option for small business contractors whose owners either want to exit or take their company into more full-and-open contracts that critical for the next phase of growth.

“Folks are realizing that small businesses make up a large part of the marketplace and that we need to identify and create strategies that aren’t just fit for mid-market or larger companies but rather that fit the need and cost appetite for small businesses,” Andrew told me.

Loan programs run by the Small Business Administration are starting to become more prominent as contractors with set-aside status look for options to try and fuel growth, she said. There is also the opportunity that good old-fashioned networking presents in finding someone in a similar situation and path.

“Sometimes if you can help a fellow government contractor who needs to exit… and at the same time you can also leverage past performance and in the long run save money and make a good business decision because you’re going to get existing revenue, it’s a win-win for everyone,” Andrew said. “Folks are starting to understand the importance of making connections with those that have similar set-aside statuses.”

Some would have otherwise thought they would have to stay in the small business arena, she said, but are now realizing they need to think about an exit or transaction opportunity earlier on.

And just because large companies come together to make even larger entities does not necessarily reduce the addressable market for small businesses. As Andrew pointed out, federal agencies still have small business prime contracting goals to work against, plus the various subcontracting goals that may be required in certain individual procurements.

“There are still going to be the same amount of opportunities regardless of who is doing the full-and-open work on the small business side,” Andrew said. “There’s probably even more pressure on some of the larger folks to make their small business goals from a subcontracting perspective as well.”

There is also one additional tool companies of all shapes and sizes have to serve as a platform from which to grow from: incumbency and past performance. On average, nearly three-fourths of all government contracts go to the incumbent and some win rates at certain agencies exceed 90 percent for the current holder.

That past performance becomes even more prominent as contracting officers and other acquisition staffers retire out of the federal workforce. Andrew said small firms should not discount the option of acquiring a company with that past performance and especially at an agency with high incumbent win rates.

It is at least worth “looking into understanding if it’s a better and a more cost-effective path that will allow you to grow much more quickly than if you just grow organically,” Andrew said.

“You could try to win a lot of work and pay a lot from a business development perspective and not have anything to show for it. At least via an acquisition, you do have contracts, existing revenue and existing profits you are able to demonstrate.”

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.