There is a lot of attention paid to developing a strategy in the early stages of a business, but that plan doesn’t always include what the endgame looks like for your journey. In consulting with our partners @sbLiftOff, we asked them to take us on a deep dive into the M&A environment within government contracting and the importance of including the option of mergers or acquisitions in the initial planning stages that inspire the trajectory of your business. Knowing where you want to end up can influence and affect the path you take along the way!
My partner, Sharon Heaton, CEO of sbLiftOff, painted a vivid picture for me on how her company assists growing govcons considering the possibilities that M & A can provide for their business. The team at sbLiftOff is a national M & A advisory firm that serves privately held businesses and government contracting companies between $25M and $150M in revenues and at least $2M in EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). They have closed transactions on behalf of both buyers and sellers in a wide variety of industries including cybersecurity, IT, data analytics, logistics, biotechnology facilities maintenance, and human capital solutions. Heaton explains, “ A company is a machine that when working well, takes in revenue and produces a profit. That is incredibly valuable. The holy grail however is if the company/machine itself has value so that it can be sold to a third party. In that way, the owner gets profits when they own the company and a significant liquidity event when the company/machine is sold. Not all companies are a machine that is transferable. The company/machine has to be built and operated in such a way that such value is created. Not all profitable companies are transferable.” Understanding these concepts when starting out can prevent unreasonable expectations for where your value lies.
Consultation from experts at sbLiftOff will share with business owners that it is essential to begin exploring your options up to 3-5 years before you are actually ready to sell so that you maximize your new perspective on the market and thus improve the value of your business before you’ve reached the end of your journey. Heaton elaborates, “Owners have a hard time seeing their company objectively and certainly need the perspective of an “outsider.” sbLiftOff will review the company’s revenue, margins, backlog, management, agencies supported, and many other factors to give the owners a sense of how the market is likely to view the company. It is better to have a 360 degree view of the company from multiple perspectives. And in many cases, changes can be made to the company that will improve value.” With a process timeline of typically 9-12 months, initiating your consultation early can help shape the ultimate outcome.
For this and other helpful tips for growing govcons, sbLiftOff is graciously offering our network a free 30-minute consultation if you reach out and reference our blog. The best way to reach them is to call or email and they will be happy to schedule some time to speak with you and advise on a plan to move forward. www.sbliftoff.com sbheaton@sbliftoff.com
Again, we are grateful to Sharon Heaton and her team at sbLiftOff for their partnership with this publication!