Who Usually Buys
- Larger contractors
- Firms adding a contract vehicle, a customer or cleared staff they could not hire fast enough on their own.
- Private equity groups
- Investors building a platform of service firms, usually above roughly a million dollars of EBITDA.
- Managers inside the firm
- Leaders who know the work well, though they often need seller financing to close.
Contracts Are the Asset
A buyer of a government services firm is really buying its contracts and the people who perform them. The first request is usually a list of every prime contract and subcontract, with its ceiling, period of performance and option years.
A contract with four option years left is worth far more than one that recompetes six months after closing. Buyers discount revenue they may have to win again.
Set Aside Status Can Change at Closing
Many small firms win work through small business or other set aside programs. A sale to a larger company can affect whether that status carries forward on future awards. Ask your attorney how a sale would affect each contract before you talk price.
People and Clearances
Cleared employees take time to replace, so buyers count them carefully. They also look at how much of the customer relationship runs through the owner. If you are the only person the program office calls, that is a risk a buyer will price in.
What Moves the Multiple
- A spread of contracts across more than one agency or command
- Prime work rather than mostly subcontracts
- A pipeline of bids with a record of wins
- Clean indirect rates and an accounting system that can pass a government review
Customer concentration is common here, since one command may pay most of the bills. Our guide on selling a company with one large customer covers how deals are structured around it.
Before You Go to Market
Gather the contracts, modifications and performance reviews in one place. Clear up any open questions about ownership, since a buyer will check who controls the company.
If you have had a recent unsolicited approach, read handling an unsolicited offer first.
On the state side, the closing obligations pages cover Virginia filings that apply to almost every sale. To learn what your firm might bring, request a sale estimate.