Financial services company Baird hosted its annual Government & Defense Conference on Thursday, bringing together industry leaders from across the federal sector to discuss the state of the government contracting industry, the impacts of recent sociopolitical events on the economic landscape and business strategies for the future.
Baird managing directors and Wash100 Award recipients Jean Stack and John Song have grown the event from a conference with 500 audience members in its first edition in 2018. This year’s event hosted a whopping 1,400 viewers virtually and in person at the Ritz Carlton Hotel in McLean, Virginia.
The day’s talks surveyed executives and voices from private and public companies alike, such as CACI International and BlueHalo, up-and-coming technology organizations like HawkEye 360 and government representatives such as Under Secretary of Defense and DOD Comptroller and Chief Financial Officer Michael McCord, who is also a previous Wash100 Award winner.
A common theme was how radically the defense industry has shifted after the Feb. 24 Russian invasion of Ukraine. In an exclusive interview with GovCon Wire, Stack noted that due to this seismic global catastrophe, there is a renewed, widespread belief in the necessity of the military.
“It’s finally a nonpartisan issue. There is equal energy around defense from both Republicans and Democrats—there is nobody not saying that defense isn’t important. We are now the most important industry,” Stack asserted. She was reinforcing the thoughts of Daniel Clifton, the head of policy research at Strategas, a politically-informed advisory firm owned by Baird, with whom Stack engaged in conversation at a midmorning keynote.
During her own remarks, the Government & Defense M&A Market Insights address, Stack dubbed the word of the year “permacrisis,” referring to the constant embroilment of the U.S. in matters such as the Ukrainian invasion, anti-trust challenges to industry deals and what the managing director views as an inevitable oncoming recession.
Stack’s talk also highlighted that the U.S. reached “peak” inflation in June, which she views as a relative upside and that the country experienced declines in equity markets and debt markets for an unprecedented three quarters in a row. Additionally, Stack said that “deal-making is much harder this year” in terms of mergers and acquisitions, which is her and Song’s area of expertise.
“Last year was such a feeding frenzy that it pulled deals that would have otherwise closed this year into last year,” Song told GovCon Wire regarding M&A trends.
Song attributed the cautionary stance companies are taking this year toward M&A to the fact that for the first six months of the government’s fiscal year, the sector found itself in a continuing resolution due to the lack of a finalized Department of Defense budget.
“From a buyer perspective, that is a very bad fact pattern if you’re going to be aggressively acquiring companies that are affected by the same realities. And then if you’re a selling company, you never want to be in the position where you’re too soft on the numbers that you’re presenting to the overall market,” Song elaborated.
“Everyone did a big deal last year,” Stack chimed in. “So, from a strategic buyer perspective, companies are pausing, they’re integrating. There are things that they want to do, but they have to be perfect,” she shared, adding that 2022 was thus a year of reflection and consideration for many organizations.
Song and Stack are co-heads of Baird’s government and defense investment banking practice as well as managing directors for the company. The former executive said he views the annual conference, which this year drew participants and onlookers from across the globe, as a “labor of love.”
“We are able to facilitate a large-scale dialogue on the things that impact our industry. And the fact that we have an ability to contribute to the broader market is something we’re incredibly proud of,” Song remarked.
