Government contracting mergers and acquisitions deals are on the upswing after a year and a half of slow progress. That was one of the resounding themes of the 6th Annual Government and Defense Conference, hosted by Robert W. Baird & Co., at the Ritz-Carlton, Tysons Corner on Wednesday. Baird Managing Director and Wash100 Award winner Jean Stack, who is one of the event’s principal organizers, explained in her opening State of the Market update that while M&A deals across industries in the U.S. have been down 24 percent in the last year, they’re “rebounding” in government and defense.
For the last two years, supply chain issues as a result of the Covid-19 pandemic have deterred the progress of dealmaking, especially for contracting companies working in the defense market. Additionally, what’s seen as an increased scrutiny from regulatory agencies like the Department of Justice and the Federal Trade Commission has stymied growth, and companies are presented with “significantly more cost” when attempting acquisitions and “significantly more time to get approval,” Stack said.
To explore how the defense sector is working to maintain its vitality through new technology innovation, be sure to attend Potomac Officers Club’s 10th Annual Defense R&D Summit on Jan. 31. This all-day event will feature a keynote address from Under Secretary of Defense for Research and Engineering Heidi Shyu and a host of other notable participants. Register here now!
Nonetheless, many companies remain enthusiastic about acquisitions. Noblis President and CEO Mile Corrigan, a Wash100 recipient herself, gave a presentation later in the day outlining her organization’s strategy and goals. M&A was a big focus: “we’re ready to make our next buy,” Corrigan said frankly. The chief executive stated Noblis is looking for partnerships with like-minded organizations with capabilities that will strengthen their portfolio, as well as possess “depth and breadth.” She said expertise in areas like artificial intelligence, machine learning, data analytics and quantum computing is desirable.
During an M&A-focused panel moderated by Stack’s frequent accomplice, Baird Managing Director John Song, Booz Allen Hamilton Vice President and Head of Corporate Development Chrissy Cox said the company is “leaning in inorganically” to M&A deals.
“You’re going to see more M&A for us across our mission areas,” Cox promised.
Stack reported that companies like KBR and Parsons have transformed their companies in recent years primarily through M&A deals — both have made nine major acquisitions that have expanded their footprint in the market. (In 2023 alone, Parsons’ stock price rose 35 percent.) On a parallel tract, according to Stack, L3Harris Technologies and RTX have shrewdly combined “massive” M&A deals with strategic divestitures to sustain their presence.
Still, though they’re inching back toward pre-pandemic numbers, GovCon M&A deals tended to be smaller in sum in the last year; Stack said 86 percent of deals were less than $100 million in value. Small-size technology companies are some of the likeliest candidates for acquisition. (The Baird managing director also lodged a prediction that in the next year, a significant amount of sponsor-to-sponsor deals, where a parent company offloads a business to another parent company, will occur.)
The general trend toward less risky sales didn’t stop Bain Capital, who recently acquired McLean, Virginia-based management consulting firm Guidehouse for an estimated $5.3 billion in a Baird-advised transaction. Big deals are still happening; Stack says “bespoke processes,” tailormade to each individual participant, is the “name of the game.”
Click here to read our coverage of last year’s Baird event and stay tuned for more takeaways from this year’s conference in the coming week.