M&A Due Diligence

Mergers, acquisitions and divestments are proliferating in the last few years.  Targeted investments in companies providing capabilities in hot new areas such as health, IT and cybersecurity are dovetailing with more traditional motivations to expand customer relationships and technologies, increase scale and lower costs as well as to divest lower margin businesses. Acquiring or merging with government contractors pose unique issues such as:

• Structuring the transaction (stock versus asset purchase) to optimize government unique opportunities
• Contract novation tips
• How to maintain small business status to win set-asides
• Conducting due diligence
• Minimize risks to organizational conflicts of interest and intellectual property
• Identify current or potential negative opinions about accounting and business system compliance
• Managing classified contracts
• Ensuring GSA schedules contracts are intact
• Identifying sources of both value destruction (e.g. incurred cost proposals, defective pricing assertions) and value enhancement (e.g. terminations and claim proposals eligibiliy).

There are many cost and pricing issues related to M&A activities (e.g. organization, restructuring, financing, legal/consulting, depreciation, software, related party transactions) that need to be managed which can spell the difference between a significant sum being allowed or not allowed to be charged to government contracts. For buyers, we provide unique insights for due diligence reviews to find potential bombs and opportunities for profit enhancements.  For sellers, we provide help in ensuring their business can earn the highest sales price by “cleaning up” balance sheets, tax and compliance issues are resolved, ensure files and documentation are ready for buyer due diligence review and current and prospective government contracts are generating maximum profit (at least 10% is ideal).