M&A market for government contractors increases in volatility

While deal volume in the Defense and Government Services market has been robust during the past few years, certain risks have recently made the M&A environment more volatile according to experts participating in the Grant Thornton Government Contractors Roundtable. From more stringent Small Business Association recertification requirements to budget uncertainties, shaky credit markets and the prospect of increased capital gains rates, buyers have had to step up their due diligence. In fact, say observers, this year there has been a perceptible change in the sophistication of buyers. They are looking intensely at regulatory issues and sustainability of revenues and earnings.

In addition to the typical buyers (public and private strategic buyers and private equity firms) there are two emerging groups. The first is retired owners of companies who are looking to re-enter the market. The other is foreign buyers, many of whom seeking are to increase their presence in the American defense industry. They are aided by favorable exchange rates and the size of the U.S. defense budget in comparison to Europe. Read more.