Expertise Beyond the Numbers

Q2 2016 Government Contractor Market Update

Strong Appetite for M&A Activity Continues in 2016

As we rapidly approach the end of 1H 2016, there will be a modest rise in M&A deal volume, given buyers’ increasing desire to add scale and make portfolio-enhancing acquisitions –much like the government contracting arena experienced in 2015.

Similar to 2015, ongoing budgetary challenges remain along with the associated shift toward LPTA awards and cost-plus contracts. This environment serves as a continuing catalyst for M&A activity as companies seek more efficient cost structures.

As a result, a series of headline-grabbing megamergers have been announced, wherein buyers were able to add considerable scale and realize M&A-related cost synergies. For example, Leidos announced its $5 billion merger with Lockheed Martin’s IT Business, and IBM agreed to acquire Truven Health Analytics for $2.6 billion.

SC&H Capital anticipates that the high volume of M&A activity, along with enhanced valuations, will provide profitable opportunities for shareholders exploring liquidity options.

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