Mergers & Acquisitions

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On June 23, 2016, the General Services Administration (GSA) released a final rule that will result in the most significant change to the GSA Federal Supply Schedules (FSS) program in the last two decades. 81 FR 41103 (New Rule). The New Rule introduces a transactional data reporting element to the FSS program, effectively replacing the current requirements relating to Commercial Sales Practices (CSP) disclosures and the Price Reduction Clause (PRC).

Under current FSS regulations, contractors are required to submit CSP disclosures with their initial offer for a FSS contract, which includes a broad disclosure of discounts the contractor offers to commercial customers for similar products and services. The CSP disclosures are used to identify a “tracking customer,” which consists of a customer or category of customers that will be tracked to identify pricing discounts to GSA customers. The PRC requires the contractor to monitor its ongoing commercial sales to ensure that the government receives the same price reductions given to the “tracking customer.” Through the New Rule, GSA is replacing the CSP disclosures and PRC requirements with a different method of award monitoring: transactional data reporting.

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Continue Reading Major Changes to GSA’s Federal Supply Schedules Program

Recent mergers and acquisitions activity among government contractors has been frothy, especially in the government services sector. What has been driving all the activity? Elevated stock prices and readily available credit has certainly accounted for some of it, at least until the recent decline of capital markets at the end of 2015 and thus far in 2016. However, even with the capital markets decline, there are macro trends specific to government services that at least partially counteract the decline of the broader market and cause many in the sector to remain relatively bullish on continued M&A activity.

The most important of these macro trends are contract vehicle consolidation and a shift toward low price-technically acceptable (LPTA) awards. During President Obama’s term, in the name of budgetary concerns, the administration has worked with agencies to reduce the number of federal contracts by consolidating contracts into fewer and larger vehicles. Mid-sized government services players need to grow larger to be able to continue to compete for these larger vehicles. They often seek growth by acquiring other contractors with sought-after, differentiated capabilities and deep customer relationships. Buyers are choosy when it comes to acquisitions, and contract consolidation has made it more difficult to accurately analyze whether a target’s contracts will be eliminated altogether or consolidated into a larger vehicle. This makes valuations a challenge, which helps explain why we see a fair number of earn-outs based on renewals of specific contracts. However, companies with coveted prime positions on full and open contract awards with a good backlog can find themselves highly desired targets.

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Continue Reading Will M&A in Government Services Continue to Outperform?

Bass, Berry & Sims attorney Todd Overman authored “Ten Unique Issues to Consider When Buying or Selling a Government Contractor,” outlining 10 helpful tips unique to acquisitions involving government contractors. The areas discussed include:

  1. Structuring the transaction – stock vs. asset purchase?
  2. How to deal with a corporate conversion
  3. Novation tips for the unwary
  4. Will

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In a couple of days, I’ll be headed north to Montreal, Canada, to join leading aerospace and defense investment bankers and advisors at the 2015 Fall Meeting hosted by the International Law Section of the American Bar Association. I’ll be speaking at “Headaches and Hot Spots: A Review of the Changing World of M&A in…

I’m heading to Oak Ridge, Tennessee again next week to present “Preparing Your Government Contractor for Sale: How to Maximize Value and the Importance of Internal Controls” with Ted Hotz of Pugh CPAs.

Join us on Tuesday, October 13 from 11:30-1:30 at the Oak Ridge Chamber of Commerce (1400 Oak Ridge Turnpike).

Why should you…

Next month I’ll be headed back to Tennessee for a few days and making a couple of stops! I’m excited to be teaming up with UT PTAC for its Advanced Training Executive Series. The training will be centered around the topics of teaming agreements and joint ventures, and feature a dynamic group of panelists. The…

I am participating on a panel discussion in the upcoming American Bar Association webinar, “Key Issues in Government Contractor Mergers and Acquisitions.” The webinar will be Thursday, February 12 from 1:00 – 2:30 p.m. EST.

Listeners will learn best practices for conducting business transactions when government contractors are involved. The panel will address the following…

In the November 2014 issue of Contract Management magazine, I wrote an article titled “Preparation is Key to a Successful Novation” that outlines how companies can successfully transfer a federal government contract through a process called novation. In the article, I describe the common problems that can arise in the novation process and how best…

The Court of Federal Claims in American Gov’t Props. & Houma SSA v. United States recently restated the general prohibition on assignment of federal government contracts and laid out the necessary steps contractors must follow in order to avoid an improper assignment of a lease agreement.

The case involved a contract to design, build and then lease to the Social Security Administration an office building in Houma, Louisiana. The General Services Administration (GSA) terminated the contract for default citing lack of progress. The plaintiffs brought suit alleging termination was improper and sought damages as a result of the alleged breach of contract. The defendant moved to dismiss on the grounds that plaintiff lacked standing to maintain suit against the government due to an improper assignment of the contract. The defendant alleged that the contract was assigned to Houma SSA, LLC (Houma) by American Government Properties (AGP), the original contracting party in violation of the Contracts Act.

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Continue Reading Can a contractor assign their leasing agreement with the federal government to another party?