Bob Kipps: As Sellers Return, Sustained Buyer Interest Could Buoy GovCon M&A in 2nd Half of 2013

Bob Kipps, Managing Director,  KippsDeSanto & Company

As industry dealmakers know, government services and defense deal closings during first half of this year were hollowed out by the double whammy of higher capital gain taxes and advent of sequestration that occurred earlier this year.

Anticipation of those two major events caused a noticeable pull forward of deal efforts (and closings) into 2012 for sellers who were able to accelerate their exit plans.

The “normal” sale process typically takes six months. Now that we’re into the second half of 2013, we are beginning to see transaction closings involving businesses that commenced their sale effort this year.

Accenture’s announced agreement to purchase our client ASM Research (ASM) fits that description.  For well-positioned firms like ASM (which has a large federal health IT practice and flagship contract vehicles), the M&A market has remained relatively strong.

Most large industry firms–which are well-capitalized and have a long-term commitment to the federal market — have remained interested in acquisitions this year to continue their medium to longer-term repositioning strategies.

The downtick in deals in early 2013 resulted more from a shortage of sellers than a lack of buyer interest.

In March of this year, I said we were in the “Eye of the GovCon M&A Storm.”

So while it took 7 months this year to achieve the same number of GovCon deal closings (55) that the industry experienced in the fourth quarter of 2012, recent announcements suggest we may be slowly reaching the other side of the abyss.

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Bob Kipps has more than 20 years of experience providing transaction advisory and financial consulting services to defense and technology firms. Prior to founding KippsDeSanto, he served as a managing director in Houlihan Lokey’s Washington office and helped lead the firm’s Aerospace∙Defense∙Government industry investment banking group.

Named the 2007 Dealmaker of the Year – Investment Banker by the Association for Corporate Growth’s National Capital Chapter, Kipps has also held executive posts with Peterson Consulting and Tucker Alan, advising aerospace and defense, engineering, construction and IT companies.

Kipps graduated from the University of Virginia with distinction as a bachelor of science in commerce. He is registered with FINRA as a General Securities Registered Representative and Principal (Series 7, 63, 24, and 79).