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November 2023 – Vol. 12; Issue 11

Natasha Adams on November 14, 2023

Competing for Admissions: Gaining Access to Top Contract Vehicles

  • Regardless of the apparent stability of government contract vehicles, every business requires a backup procurement strategy (or two, or three), much like how students need a safety net to catch them when leaping into the competitive world of school admissions
  • Even if admission into a particular contract or school appears to be a sure thing, there are no guarantees you will be accepted
  • Avoid depending on a single vehicle or GWAC for your revenue; instead, study additional programs containing similar benefits
  • Even when the government/school signals its interest in your services/academic record through a contract, it's essential to contemplate the potential consequences of pursuing it
  • Subcontracts, joint ventures, teaming arrangements, or study groups can broaden opportunities to areas that individuals might not have initially been capable of accessing
  • Diversifying your options and establishing backup contracts and teaming arrangements can mitigate individual risk while increasing complexities

Instability in Vehicle Admissions/Acceptance Processes

When selecting the most suitable schools or vehicles to apply to, understanding the structure, scope, and other risks involved in the procurement can help avoid unnecessary setbacks. The cancellation of Alliant 2’s small business track several years ago serves as a formidable example of why establishing a wide portfolio of potential schools to apply to is important. Many applicants who had centered their focus on this vehicle for IT services, found themselves disappointed and exposed to unnecessary uncertainty and a long gap until Polaris began to take shape. Even to today during the pre-award stage of the Polaris solicitation, protests have been filed and uncertainty is increasing. While unclear, the concern for many is that the new Polaris solicitation could be disrupted just like Alliant 2 was. In the situations where government agencies cancel admission of a particular program, two key outcomes typically occur: students and resources are redirected to different vehicles with the same offerings and, to address the demand for specific services, the obligations are distributed elsewhere. These continued issues regarding the government’s ability to consistently provide successful options underscores the importance of prioritizing additional pathways that offer stability and align with an individual or organization’s needs.

Select Your Top Schools and Have Strategic Backups

Many businesses are aware that recent paths from RFP release to award have become increasingly convoluted with changing timetables, multiple amendments, and significant protests. Even getting to submission isn’t a guarantee that there will be an award – see the recent cancellation of the $5.3B Air Force EC2 vehicle. Students on the EC2 degree path who initially hoped to secure their future engagement (and subsequent revenue stream) selling high value cyber solutions are left to explore alternative options and try to recoup their significant B&P investment. Vehicles and schedules with rolling admissions, such as Seaport NXG and the GSA Multiple Award Schedule (MAS) can be excellent safety schools in these scenarios. Despite the admissions process allowing the government the right to cancel the application process at any time, the disappointment of the contractors who put their valuable resources and time remains evident. Just getting on a contract vehicle in and of itself, as with applying to different schools, is an expensive proposition. Whether you’re a 2-person 8(a) or a 10,000-person large, the cost can easily run $100k, if not significantly more. Despite the expense, contractors continue to apply and invest knowing that these contracts can serve as a primary revenue source and making it increasingly important for individuals to consider multiple contract types for successful procurement. The cost associated with applying to various contracts or schools presents firms with the opportunity to allocate their resources strategically, focusing on institutions where they have a higher likelihood of acceptance.

Studying your Options

University Case Study: NASA SEWP VI

Even with Ivy League, best-in-class contracts like NASA SEWP, the procurement process can be unpredictable. While SEWP shows promise for continuing to be labeled as a best-in-class contract vehicle, in its current draft form, it still presents several challenges. Unlike some other contract vehicles, SEWP VI doesn’t impose a limit on the number of students awarded, which may change how some agencies and other schools view it. Additionally, if an individual doesn’t keep their grades up and secure a task order within 12 months of receiving an award, they effectively lose the ability to compete further. Moreover, the introduction of IT service categories has left large IT service providers uncertain about whether their related work will fall within that 12-month period or be pushed to the next semester. With the extensive cost involved for any organization to compete for contracts such as SEWP, the pathway to acquiring work remains uncertain. So even when you ask your college advisor if applying to a specific school will be a worthwhile investment, one simply cannot definitively tell. 

Avenues to Admissions: Teaming Arrangements

Contractors considering their options in today’s competitive college landscape for high-value scholarships and contracts can find a variety of pathways to mitigate costs and risks including CTAs, Joint Ventures, and Mentor-Protege Joint Ventures. For instance, Mentor-Protege JVs offer small companies access to the past performance of larger companies, unlocking opportunities they couldn’t access independently for both the large and small firms. CTAs, on the other hand, allow peer companies to combine their unique capabilities to better serve customers. However, despite the multitude of risk-reduction strategies, they can also introduce additional complexities and management challenges. In the highly competitive and uncertain market of procurement, understanding the appropriate amount of attention each application needs can make a significant difference in one’s initial and continued success.

10 Ways to Prepare for Upcoming GWACs

  1. Stay informed on all major vehicle schedules, familiarize yourself with RFP drafts, and begin identifying back-up schools/strategies in the event you aren’t accepted into your first choice
  2. Choose a degree path that is in alignment with your current/future capabilities to avoid having to change majors, or worse, getting kicked out of the program
  3. Use the application evaluation criteria provided in the RFP to determine which completed and/or ongoing projects position you the strongest
  4. Begin compiling your supplementary materials NOW to identify documentation gaps and reach out to COs before the busy application season starts
  5. Contact your previous institution/customer for a new, updated copy of your FY23 CPARS transcript
  6. Ask questions and continue asking until the government answers – it may take multiple rounds of Q&A before you actually receive a clear answer
  7. Get creative with your strategy and consider finding a teaming partner if you’re unsure whether your grades alone are high enough to meet the threshold
  8. Attend industry days and watch webinars from agency/sponsored admissions advisors as crucial information is oftentimes provided, as well as additional opportunities for Q&A
  9. Use advisors, peers, and other “upperclassman.” Consultants with extensive knowledge of the application process, in areas such as benchmarking and teaming arrangements, can help an organization better position themselves for success
  10. Ensure your immunization records including financial systems, facility clearance levels, and organization certifications are up to date and note that administrative/agency priorities may require new certifications in the future (e.g., sustainability)

Stephen Abernathy
571-409-4189
stephen.abernathy@dwpassociates.com

Andrew Stringer
401-261-0267
andrew.stringer@dwpassociates.com

Fiona Cronin
850-559-6395
fiona.cronin@dwpassociates.com

October 2023 – Vol. 12; Issue 10

DWPA Staff on October 4, 2023

Tracking Federal M&A’s Fall Foliage

  • Along with the incoming vibrant foliage and brisk temperatures of the fall, federal M&A activity may have its own peaks with PE financing while feeling the cooler temperatures of uncertainty around FY24 funding and tighter budgets
  • Following our March Practitioner’s Perspective, which featured a forecast for 2023 federal M&A activity, we are closing out the government fiscal year by recapping our predictions and comparing them to deal count data
  • The buy-side continues to be driven by PE and PE-backed firms and in-demand tech talent, with buyers feeling warmer towards F&O business and opting to avoid majority-SBSA companies
  • Procurement delays are leaving some sellers out in the cold, while a tighter market makes a frosty forecast for “story” companies
  • Leaf peepers may be able to spot peak foliage for mid-tier acquisitions this autumn
  • While M&A activity has cooled down 2023 YTD compared to the same period in 2022, we expect the leaves to turn with increased volumes through the end of the year

The Turn of the Season

DWPA forecasted 2023 federal M&A activity in the March Practitioner’s Perspective. Now, as we enter the fall season and the government fiscal new year, it is time to reflect on the 2023 M&A atmosphere thus far and put on our weathermen hats again. In March, we forecasted that capital markets, private equity activity, technology trends, strategic acquirer activity, and a troubled geopolitical climate would stimulate more M&A activity. Conversely, we projected that higher interest rates and a looming debt ceiling, paired with procurement trends emphasizing Small Business Set-Asides, would cool deal volumes slightly. Heading into the final three months of the year, most – but not all – of our predictions hold true. Overall, transaction volumes were initially cooler than anticipated, with data showing a 21% decrease in closed transactions in the first half of 2023, as compared to the first half of 2022.

Buyers to Face the Cold

As temperatures drop, uncertainty looms over continued risk of a government shutdown and another interest rate hike, we expect buyers, particularly PE and PE-backed firms, to remain active in the market. As of March, we expected legacy consulting firms to remain the most aggressive buyers of scarce/in-demand capabilities to augment their existing federal IT portfolios. However, private equity (funds investing in platforms as well as acquisitions for platforms companies) has constituted the majority of deals closed in 2022 and continues to extend that lead in 2023. We also expected buyer strategy to be split between paying up for F&O businesses and stacking a few highly differentiated small businesses. This forecast was accurate, as many buyers are not willing to take on the risk of majority Small Business Set-Aside work. The hottest commodities have not shifted much since our last forecast—think DevSecOps, AI/ML, Low/No-code, and Cloud as the primary buzzwords, with bonus points for Cyber or Intelligence.

2022 and 2023 deal counts

Select Sellers to Stay Warm Indoors

Less than favorable economic conditions (debt ceiling uncertainty, turbulent credit market dynamics marked by regional bank failures, etc.) have generally not deterred sellers from coming to market by any significant margin. However, select businesses will likely elect to stay indoors this winter. As for small businesses, the OMB’s increase in the small business revenue threshold size has already disincentivized SB owners from wanting to sell, as expected. As for 8(a)s, we do not expect the recently enacted social disadvantage narrative requirement to have any tangible impact on M&A activity, although 8(a)s that must submit new certifications will demand more due diligence from prospective acquirers. Generally, “story” companies that are not obviously attractive assets will be highly scrutinized in a tighter market and will likely wait a few years before trying the market. At a macro level, the chilling effect of procurement delays will continue to be felt – likely more by would-be sellers than buyers, as companies banking on that one recompete continue to wait out the cold.

Vibrant M&A Volumes to Come

We expect M&A foliage to become more vibrant through the end of the year. Specifically, we predict peak foliage for actionable mid-major assets in the market. We expect a resurgence in mid-tier acquisitions by PE platforms to keep warm through the winter. The historic trend of sizable, high-profile deals in recent years and the shortage of mid-tier contractors gives way to an increased appetite for mid-major assets for an autumnal cornucopia. Further, we expect continued PE and PE-backed platform interest in acquisitions through the end of the year. We also anticipate continued emphasis on cybersecurity and intelligence procurements into the new year. Finally, we will be avid leaf peepers when it comes to watching for a potential government shutdown and any impact on deal flow – could the government really move towards tighter budgets after 5+ years of good spending? We’ll continue to monitor the landscape.

Top 10 Drivers of M&A Activity in 2H23

  1. PE interest accounts for the majority of closed transactions
  2. Scarcity of actionable mid-tier targets causing many buyers to reach for earlier stage targets
  3. Interest rate uncertainty impacting total leverage far more than valuation
  4. Sellers willing to take increased structure to prop up multiples
  5. Pivot away from the War on Terror toward peer competition with China and Russia
  6. Concern with tighter federal budgets after 5+ years of good spending enticing those that can come to market
  7. Procurement delays causing those waiting on recompetes or major new business awards to have to stay on the sidelines
  8. Insatiable demand for scarce technical capabilities around cyber, DevSecOps, AI/ML, autonomy, etc.
  9. Looming election uncertainty and choppy debt markets make mega deals hard to execute
  10. Foreign buyers experiencing renewed interest in gaining exposure to the world’s largest defense budgets via M&A

Marty Brennan
703-587-7454
marty.brennan@dwpassociates.com

Charlotte Brewer
404-858-6974
charlotte.brewer@dwpassociates.com

Shera Bhala
410-544-5254
shera.bhala@dwpassociates.com

September 2023 – Vol. 12; Issue 9

DWPA Staff on September 14, 2023

Drafting Your Way to Federal Growth: Strategy vs. Tactics

  • In designing a successful growth plan, federal contractors should balance strategic steps with tactical actions.
  • Fall brings a busy football season and the conclusion of FY23. Like any prepared fantasy team charting its path to the playoffs, businesses should synthesize strategy and tactics to hit revenue targets.
  • How do you win the game? What is your objective? Who do you want on your team? When do you need them? Strategic thinking necessitates a broad view across the playing field.
  • Are you balancing time spent on delivery vs. growth? When should you attend industry days? How many proposal writers do you need on each team? What setbacks do you anticipate? Consider regular huddles to implement tactics toward achieving strategic expansion.
  • A plan that balances strategy and tactics focuses on major objectives and practical measures. This equilibrium helps to ensure that you’re not lost in the big picture, and that you can call an audible should the field read be different than anticipated.
  • Develop your Madden Chart, prepare a winning game plan with ground-level tactics that lead you to your strategic endzone.

You’re on the Clock!

The leaves are falling, the air is crisp, and laptops are humming as fantasy football owners log back into their long-dormant leagues. While federal contractors simultaneously prepare for the final days of FY23, both groups find themselves asking the same question: how to balance a coherent growth strategy with clear, effective tactics for the coming months? After all, fantasy football drafting strategies set the tone for the season—relying on trades from stingy fellow owners or grasping for straws on the waiver wire are easy ways to end up with an embarrassing tattoo or wearing your rival’s jersey for a day. Just as fantasy owners must carefully select their lineup, contractors must develop clearly defined and reasonably set strategic initiatives to empower federal growth for the year ahead. Prioritization of a small number of high-impact initiatives, reinforced with a tactical approach that includes specific assignments and actions, can help companies create a focused, attainable path to growth.

Sleepers, Bye Weeks, and “Do Not Drafts”

If fantasy owners could perfectly balance ease-of-schedule, high-value players, and a healthy bye week mix, anybody could be Matthew Berry or Field Yates. The fact is every fantasy owner is going to give up something when the draft jingle chimes. In the same vein, contractors cannot expect to pursue every single strategic initiative brainstormed at the annual strategic offsite. Build out a team with uniformly spread bye weeks (or an evenly distributed pipeline), and you may find yourself having to sideline your ease-of-schedule strategy (or focus mostly on big-swing, low p(win) opportunities). Draft Patrick Mahomes in the second round (or make hiring a dedicated capture manager an immediate priority) and you may not have enough depth in skill positions (or enough funds to train internal resources). Weighing the importance, value, and attainability of strategic initiatives against each other is key before diving into pure tactics.

Federal Growth Strategy and Tactics

Setting Your Lineup

Strategies provide overarching guidance—fast, sustainable federal growth is underlaid by a set of dedicated, tactical approaches which outline clear actions and responsibilities. The same is true in fantasy football, where this realization happens quickly—once the dust from the draft settles, Week 1 lineup setting is usually right around the corner. For those “handcuffing” star running backs with their backups, a tactical approach of monitoring the injury report before kickoff will ensure they are never left with a goose egg. In the federal world, smart tactics similarly make up the backbone of an effective strategy. Planning to expand into a new customer? Targeting dates for executive meetings with agency leaders might be a good start. Aiming for $50M in TCV submission before the end of the quarter? Assigning capture and proposal managers to specific deals can make that number tangible. Just as fantasy owners set their lineup each week, companies in the federal market should consider quarterly or even monthly reviews of strategic goals and tactical approaches.

Fumble!

No matter the amount of strategy or tactics, fantasy owners and federal contractors know well that both the fantasy world and the federal market bring their fair share of surprises. A fantasy draft strategy that relies on ease-of-schedule would normally employ a tactic of rotating players during their weeks facing elite opponents. However, when your leading scorer inevitably goes down with an injury, plans will change – suddenly, your tactic of reviewing other teams’ trade needs every Tuesday becomes crucial. The balance of strategy and tactics is useful in promoting flexibility. An overarching strategy can keep a singular focus, while numerous tactical avenues keep things flexible enough to weather nasty surprises. For example, under a strategic goal to win at least 1 of 3 major bids, the tactical decision to implement a weekly review of capture and proposal resource allocation can provide quick response to sudden RFP requirement changes. In the demanding worlds of fantasy football and GovCon, strategy and tactics must coexist in harmony.

Mock Draft of Growth Strategy and Tactics

  1. WR1: Run up the score—strategically anchor company growth goals on clear comparative advantages
  2. RB1: Every-game starters—understand that delivery team needs may require tactical flexibility within growth strategies
  3. WR2: Strength-of-schedule play—lay out the year ahead for major capture efforts and large bids
  4. QB1: Team leader(s)—hold annual exec gatherings that set the strategic and tactical tone for the upcoming FY
  5. RB2: The “workhorses”—assemble a dedicated capture and proposal team that meets regularly
  6. TE1: Unsung heroes—mix in smaller, more attainable strategic goals focused on building internal capacity
  7. D/ST: The elite, competitive edge—“stream” teaming partners when opportunities exceed internal capabilities
  8. K: The longshot—low p(win), high-value wins are rare, but can result in tremendously quick growth

Jack Jacobs
757-692-6777
jack.jacobs@dwpassociates.com

Shera Bhala
410-544-5254
shera.bhala@dwpassociates.com

Jessica Butturff
703-786-1841
jessica.butturff@dwpassociates.com

August 2023 – Vol. 12; Issue 8

DWPA Staff on August 24, 2023

Prepare Your Social Disadvantage Narrative to Help Weather the 8(a) Storm

SBA’s Response to Court Ruling on 8(a) Program

A storm is brewing on the horizon following the Ultima Services Corporation v. U.S. Department of Agriculture case where the Eastern District of Tennessee ruled that the use of the “rebuttable presumption” in the 8(a) program violated the 5th Amendment’s due process clause and, thereby, enjoined the SBA from future use. The SBA has since placed a “temporary pause” on accepting new entrants pending program and application process revisions. However, the SBA has released an interim program update requiring all future applicants and current members (excluding Native organizations) whose status was determined using the “rebuttable presumption” to provide a social disadvantage narrative with substantiating evidence that must be approved by the SBA to receive 8(a) certification. While there is still uncertainty regarding the path and severity of this storm, firms should continue monitoring program updates.

Tracking Potential Storm Damage

As we track this storm, there are many possible scenarios for how it could unfold. One scenario is an increased likelihood that awards can be protested, and one’s 8(a) status could be challenged. Using § 124.103 (b)(3), competitors can challenge the status of current members presumed to be socially disadvantaged by providing sufficient contradictory evidence, which may result in defending 8(a) members having to evacuate from the program or vacate awards.  Now is the time to create and submit your social disadvantage narrative that will solidify your status and ability to bid on, win, and retain awards as an 8(a). As with all historic storms, the full extent of the ruling’s implications may not be felt for years, but with the removal of the “rebuttable presumption” and consequent program changes, the future landscape of the 8(a) program and GovCon industry will be permanently altered.

Tracking Hurricane SBA infographic

Who’s in the Storm’s Path?

If you relied on the “rebuttable presumption” to secure 8(a) status, you cannot outrun this storm – you will be impacted and need to prepare. Prior to the court ruling, a company could claim social disadvantage using self-evident or self-certified criteria and it was assumed to be true, leading to unquestioned admission into the 8(a) program. Now, those who depended on the “rebuttable presumption” must prove their social disadvantage through written narratives in accordance with this guide / section § 124.103(c), which requires providing specific evidence that their social disadvantage was personally experienced and directly impacted the firm’s ability to progress in the GovCon industry. A recent update from the SBA clarified that individual 8(a)s who have already provided evidence proving their status will not be hit by this storm. Further, recent SBA communication to all current 8(a)s informed them whether they have met the requirements and can continue, or if they now need to prove their social disadvantage. As we near the end of FY23, it is important for everyone in the storm’s path to start gathering evidence to prove their social disadvantages.

Weather Preparedness: Writing a Successful Narrative

A strong social disadvantage narrative will be critical to surviving this storm and gaining or sustaining membership as an 8(a) company. Narratives must include personal relevance and avoid any generalizations and/or group experiences. These experiences must also show longevity and continued struggle – single strikes of lightning or isolated events of hardship may be discredited. Evidence should validate your claims and demonstrate a direct effect on opportunity, revenue, contracts, and other losses that have proven to limit your ability to grow and excel in the industry. Further, the supporting evidence should be detailed and specific, and not drawn from widely available data sources. By the end of FY23, the SBA will likely be flooded with applications, which will make their process of granting 8(a) entrance much longer. While we may not know how this storm will unfold, following these recommendations and using this guide / section §124.103(c) will better prepare your 8(a) status defense in the midst of this unpredictable environment.

10 Best Practices for Writing Your Social Disadvantage Narrative

  • All individual 8(a)s who were admitted using the “rebuttable presumption” are in the storm’s path and required to submit a social disadvantage narrative
  • Avoid procrastination – start preparing your narrative and strategic response to impending program updates now
  • Follow this guide, based on § 124.103(c), to make sure your narrative can weather the storm and meet the current SBA 8(a) program criteria
  • Gather qualitative, specific evidence of your personal social disadvantage experiences – if you didn’t personally experience it, don’t write it down
  • Stockpile evidence such as quantitative loss of opportunities (revenue, opportunities, or contracts) in Education, Employment, and Business and ensure affidavits / sworn statements are notarized
  • SBA will use a “preponderance standard” when reviewing the evidence provided – make sure your evidence meets the standard
  • Be well versed in the social disadvantages that were part of the initial application to include in your narrative (current 8(a)s and those who have already applied)
  • Be aware of reasons why SBA may decline applications or contract awards based on your social disadvantage narrative
  • Stay vigilant of the storm’s path and any new guidelines, program updates, and processing times from the SBA or DOJ
  • Seek out trusted weather experts to help you navigate through this changing environment and aid you in writing your social disadvantage narrative

Jessica Butturff
703-786-1841
jessica.butturff@dwpassociates.com

Robb Wong
301-996-8696
robb.wong@dwpassociates.com

Etienne Reche-Ley
206-484-9059
etienne.reche-ley@dwpassociates.com

July 2023 – Vol. 12; Issue 7

DWPA Staff on July 26, 2023

Tending the Campfire: Igniting the Flame of Market Intelligence

  • Leveraging expert knowledge crosses the bridge from market research to market intelligence and will strengthen an organization’s ability to develop future growth opportunities
  • Understanding and avoiding widely known market intelligence mistakes and following best practices will ensure organizations are utilizing the most relevant information and resources applicable to their goals
  • Subject Matter Experts (SMEs) are the veteran guides used to navigate from market research to market intelligence, providing practical knowledge and giving additional meaning to information gathered
  • Creating a “culture of market intelligence” supports an organizational commitment to ensuring data-driven and expertly informed decision-making
  • Market intelligence serves as the foundation for broader strategies, providing key knowledge and clarity that can be used to identify bid opportunities and increase p(win)
  • Intentionally using market intelligence can help organizations see beyond the federal market horizon, drive businesses forward, and reach your desired summit

Preparing for the Camping Adventure 

The implementation of market intelligence on businesses has become a familiar tactic to improve numerous aspects of organizations. However, market intelligence needs to be properly planned for, just like a camping trip. Organizations need to beware of common market intelligence mistakes, as it can be easy to stray down the wrong trail. Common mistakes include only using one source, assuming inconsistencies to be trends, basing decisions on data alone, using out-of-date data, attempting to gather data at the last minute when it should be consistently tracked, and collecting information without an end result in mind. Learning and fully understanding what both market research and market intelligence are and the proper steps to take to be successful with market intelligence will prevent an organization from repeating known misconceptions. This will better position an organization for future operations, as forgetting your raincoat and running out of water are mistakes you will not make twice.

Navigating Market Intelligence

With the increased accessibility and ease of interpreting data, market research has become a standard practice and a growth-accelerator for an organization’s strategic decision-making. However, in the deep woods of today’s highly complex and competitive federal market, raw data and information alone will not keep you from going astray or missing your mark. Organizations need to not only plot the collection of data, but also evaluate, understand, and apply data outcomes in a way that is meaningful and tailored to a desired goal. Without these navigation skills, organizations may find themselves lost without a compass ‒ feeling overwhelmed and wasting hours wandering aimlessly through a dense forest of data, facts, and figures with no actionable results. Bearing the load of insights and analysis is what transforms market research into market intelligence, a differentiator for hiking through the federal market wilderness. The true trail guides of market intelligence are subject matter experts (SMEs), individuals with varying expertise who can read between the lines, pointing out the paths worth taking and providing crucial color and context to a vast landscape. Known as “the consultants of the consultants,” market intelligence SMEs leverage their expertise and industry knowledge to guide organizations on their path, bringing mundane quantitative data to life by providing a qualitative perspective and providing organizations with additional tools for using information.

Market intelligence infographic

Cooking up a Culture of Market Intelligence  

While the benefits of market intelligence are vast, they are only felt when market intelligence is used organization-wide to complement other business offerings and drive company goals through data-driven, expert-informed decision-making. Too often, market intelligence gets left alone in the woods, finding itself delegated to a few individuals and disconnected from the larger organization. Operating in a vacuum such as this is not an effective use of market intelligence resources. Instead, market intelligence must be connected to all aspects of the broader business and guide strategic initiatives (e.g., key hires, mergers and acquisitions, etc.) and offerings. Companies must create and adopt a “culture of market intelligence,” ingraining the best practices and consistent utilization across business lines and into the very fiber of the organization. This culture fosters collaboration throughout the organization and ensures individuals from each line of business are aligned to the greater goals and targeted outcomes and allows for market intelligence SMEs to set appropriate parameters, acquire appropriate data, and provide expert knowledge to help move the organization forward.

Lighting the Campfire: Operationalizing Market Intelligence for GovCon Strategies 

True market intelligence is much more than warmed-over empirical spending data, market sizing, and organization charts. When operationalized, market intelligence has a transcendent impact on strategy at the GovCon corporate, group, and bid opportunity level – delivering tangible value that informs and rationalizes decision-making. In the GovCon space, best practices include “Company X” blackhat role playing, “solution to win” analysis (not your grandparents’ outdated “how low can you go” price to win assessments) and ferreting out credible info on cure notices and award fees rather than relying on bloviations from competitors seeking to unseat incumbents. Useful market intel leverages non-obvious event correlation (e.g., business developer migration paths are a reliable early warning indicator of companies that are in trouble) to inform analysis, develop compelling win themes, and validate the tendentious rumors spread around the campfire. Well-run companies know that there is no true “white space” in the GovCon market. Market intelligence helps identify the sweet spot for any firm – the intersection of market attractiveness and the ability to compete. The best market intel doesn’t just confirm what you already knew…it unveils actionable insights you didn’t know to ask about.

10 Market Intelligence Elements That Can’t Be Ignored

  • Informed, qualitative perspectives are as valuable as quantitative perspectives and providing professional input can assist in avoiding group think and internal echo chambers.
  • Establishing specific objectives and ensuring everyone understands them is a primary imperative.
  • Understanding an organization’s capabilities, customers, and structure is necessary to identify the right data sets.
  • The market lacks one authoritative source of intel, making the crucial discipline the ability to seek out various sources, federate the data, and then interpret the ground truth through triangulation.
  • The ideas, messages, and value propositions resulting from market intel need to be tested and validated.
  • Even the most compelling value proposition requires knowing if someone is willing (or able) to change—more-so for mission-focused customers!
  • When your capabilities help customers get things done (tangibly, and intangibly), it sells itself.
  • Even the best solution still must conform to the constraints of the market; and always assume there are others trumpeting similar features and benefits.
  • Understanding competitor strengths and weaknesses is key; but knowing why a customer is bound to a company is more valuable.
  • There is nothing of greater benefit than having talent that not only can collect and interpret data from an analytical standpoint, but also provide practical, objective perspectives.

Ted Milone
202-744-1363
Ted.Milone@dwpassociates.com

Meredith Aurora
703-362-7737
Meredith.Aurora@dwpassociates.com

Jessica Butturff
703-786-1841
Jessica.Butturff@dwpassociates.com

June 2023 – Vol. 12; Issue 6

DWPA Staff on June 29, 2023

Keys to Setting Off Showstopping Orals Presentations

  • Planning your work…working your plan: structure your flow, use voice variability to connect with listeners, and gesticulate
  • Understanding and establishing a connection with the audience is essential to meeting their needs and achieving intended outcomes
  • Incorporating visual aids and storytelling can ignite audience engagement, emphasize key points, and enhance comprehension
  • Practicing extensively and receiving feedback from knowledgeable sources will help to refine delivery, presence, and confidence
  • Regularly participating in various speaking opportunities provides a great way to gain low-stakes, real world presenting experience
  • Ending with a memorable finale and leaving your audience with a call to action can help drive desired audience outcomes

Light the Fuse: Igniting Engaging Presentations

Being an effective speaker is a critical skill which, for many people, has dulled with the pandemic, video teleconferencing, and/or the “Zoom” generation. Think of those recent times when you were listening to a presentation and hoping for fireworks but ended up with a disappointing dud of a display. Those failed presentations are a huge waste of time, money, and resources and are often due to a speaker’s unengaging delivery, lack of understanding the audience, insufficient practice and/or confusing messaging. The key to becoming a captivating speaker is establishing an immediate connection with the audience. Forging meaningful bonds and prioritizing audience connection increases information retention and creates impactful presentations that both resonate with the audience and lead to well-scored oral presentations. Further, creating a strong outline for the presentation, aligned to audience desires, will help ensure clear idea flow and straightforward delivery.

Developing Your Speaker’s “Spark” Through Practice

To put on a showstopping performance, it is vital for the speaker to practice, practice, practice! Presentations should be practiced until you are natural and able to deliver without error. You never want to be the speaker reading verbatim off the slides, a guaranteed way to lose your audience. Self-evaluation is a simple, effective way to ignite your full potential. As uncomfortable as most of us find it, recording and listening to yourself will make you more cognizant of how you sound, allowing you to identify and correct bad habits. In addition, seek feedback regularly, as it is an important component for improvement. Look for resources such as colleagues, friends, and family who can provide constructive criticism and valuable insights. For targeted and/or professional support, it can be very advantageous to work with an orals coach who is experienced in the industry/space in which you will be presenting and who can provide personalized coaching to address specific strengths and weaknesses within your presentation.

Speaking accelerators to skyrocket your orals presentation infographic

Incorporating Speaking Accelerators into oral presentations will amplify the delivery of the material, provide deeper clarification for listeners, and help the speaker seem more relateable/natural when presenting.

Unlocking Your Star Speaking Potential

As seasoned orals coaches, we recommend seeking out any and every opportunity available to improve your speaking skills. Whether it be on a large stage or giving a toast at a local 4th of July BBQ, there are numerous opportunities, modalities, and places to practice public speaking. Local events, gatherings at places of worship, toastmasters, and meet-up events offer low-stakes opportunities to increase confidence and refine skills. Participating in improv, stand-up, and theater can provide fun ways to get over jitters, learn to think on your feet and improve speech delivery. If you are looking for more structured opportunities to practice and receive valuable feedback, seek out virtual events, speech clubs and speech competitions. To gain professional practice within your organization, speaking up during meetings or leading work lunch-and-learns can enable speakers to showcase their expertise, reinforce speaking skills, and gain confidence in front of a friendly crowd.

Show Your Inner Firecracker: Presentation Delivery

Like a 4th of July fireworks show, you must start off your speech with a bang, making a strong first impression and gaining audience buy-in. Once established, build off that initial impact and hold your audience’s attention by incorporating a mix of visual aids (graphs, charts, images, etc.) to visually intrigue the audience, augment spoken content, and provide deeper understanding. In addition, weaving in compelling stories will captivate listeners and make the information more relatable and memorable. Further, speakers should use vocal variability and master delivery techniques such as adjusting pitch, tone, pace, and strategically placing pauses to effectively convey enthusiasm, seriousness, humor, and to emphasize important points. Presentations should conclude with a showstopping finale, which solidifies the message, provides tangible takeaways, and leaves the audience wanting more. Following these best practices will help speakers gain confidence, be more effective, and can elevate the ability to win work.

10 Ways to Overcome Stage Fright and Become a Dynamite Speaker

  • Project confidence – You’re the expert
  • Arrive early and familiarize yourself with the space
  • Take deep, slow breaths
  • Practice relaxation techniques
  • Elevate your heart rate beforehand to burn off energy and release endorphins
  • Find friendly focal points in the room
  • Debrief on the experience afterwards and internalize feedback
  • Visualize success and utilize positive self-talk
  • Accept that it’s okay to be nervous – Even the best speakers are
  • Hire an orals coach to launch your speaking skills to the next level

Mike Schneider
301-537-4465
Michael.Schneider@dwpassociates.com

Doug Black
703-402-2511
Doug.Black@dwpassociates.com

Jesse Ernest
703-638-2525
Jesse.Ernest@dwpassociates.com

May 2023 – Vol. 12; Issue 5

DWPA Staff on May 1, 2023

Selling Season vs. The Debt Ceiling Drought

  • “Selling season” is upon us – the time of year when agencies have to dole out the balance of their current fiscal year funding
  • Historically, the government obligates the plurality of its budget in Q4, so this is the window to get actionable projects in front of buyers
  • In addition to “shovel ready” projects, maintain a cornucopia of contract vehicles so that buyers can choose how to reach you
  • Compared to FY21 and FY22, FY23 is in like a lamb and out like a lion, with light Q1/Q2 spending presaging a historically large Q3/Q4
  • Debt ceiling default could mean a halt on payments for contractors and could make it very difficult for the government to make new awards
  • Don’t sell your crop futures yet – DC weather changes frequently – get out there, sow your seeds, and hope the weather turns favorable

Historic Crop Reports

With the same predictability as the seasons changing, the federal government requires agencies to obligate their funding on programs, products, services, solutions, and other items right around this time of year, every year. Most discretionary spending requests must be “in the process” with federal acquisition officials by a July deadline to enable ultimate obligation of funds by September 30. We call this time of the year selling season, because we know the government must put into writing the who, what, when, where, how, and how much they intend to spend this FY. This cyclicality results in a flurry of RFPs and other procurement actions as contract shops scramble to get it done in time. Industry also swings into action to get their solutions in front of customers in time to make the cut. The net result is a tendency to commit the plurality of funding obligations in Q4 of each government fiscal year, as is shown in the graphic to the right.

Seed Sowing Best Practices

If you are not prepared for the selling season storm, you may find yourself cleaning up the debris of missed opportunities in the months or even years to come. It may seem daunting, but opening an umbrella of best practices can help you better weather the storm. Prepare your proposal artifacts well in advance of agencies’ deadlines, invest in “shovel ready” solutions, and make sure customers can access you via their preferred vehicle. Increasing contract ceiling is the easy button for obligations, so socialize that and ensure you have sufficient remaining period of performance. Kick off projects now so that they can continue, despite the outcome of the debt ceiling negotiations. If the Treasury must reduce spending as a result of fiscal externalities, they may prioritize funding certain agencies/programs/projects over others, including certain mandatory programs. Strong relationships can be fertilizer through uncertain times so find teaming opportunities with organizations that have established relationships (or who might be considered agency “favorites”) inside target customers.

Discretionary spending by fiscal quarter infographic

Consulting The Farmer’s Almanac

Meteorologists are predicting that we could see a different spending pattern this year because of the debt limit crisis. Q1 spending has been relatively flat over the last three years. While Q2 saw a large spike in FY21, Q4 is consistently where we see the healthiest harvest with spending reaching its peak. FY22 was an extreme example due to the late passage of the budget. Given the slow start to the year, FY23 was shaping up to be the biggest year end in quite some time. The debt limit crisis could be the drought that wipes out the whole harvest. A debt default would temporarily halt federal spending and with the June 1 action date, contractors could experience stop payments on current work and stagnant new awards. On the other side, Q4 might be the harvest of a decade if the debt ceiling is resolved and there is a rush to get money out the door. This would equate to appropriating three quarters of the budget in the remaining third of the year.

Drought, Hail, and Locusts

In January, the US reached the statutory debt limit. Since then, the Treasury Department has utilized short term measures to delay potential default. If the Treasury is unable to continue these short-term delays, the fallout from a default would be unprecedented. Across the entire federal government, the focus would shift to payments to bond holders, then payroll for government employees and essential employees, and funding for critical programs. On May 1, Secretary of the Treasury Janet Yellen wrote to Congress, warning that the default can happen as soon as June 1. In response, the government has floated a wide range of ideas including the idea of issuing a trillion-dollar coin to temporarily absolve the debt ceiling. More conventional measures include capping discretionary spending, creating new committees to reform existing spending programs, or increasing revenues through greater taxation. If the debt limit is not increased in time, agencies would have to make cutbacks which, among other things, could decimate the FY23 federal appropriations crop.

Best Practices to Grow your Garden During Selling Season

  • Compile marketing materials, white papers, proposals, and other artifacts early to avoid last minute scrambles
  • Stay aware of agency trigger dates, windows, and deadlines as some operate on different schedules
  • Leverage agency relationships: know what solutions they are looking for and tailor your capabilities to see where they address or can be adapted to meet mission needs
  • Be ready to showcase a large catalog of capabilities – oftentimes agencies have trouble allocating money this time of year if the projects are not “shovel ready”
  • If you miss a window, continue working your established pipeline and seek alternatives to get your solutions on contract
  • Monitor debt ceiling negotiations and agency directives as their actions can vary widely as was the case with shutdowns and COVID responses
  • Do not neglect your post-September pipeline, as the selling season should supplement, not replace, your current pipeline with shutdowns and COVID responses
  • Limit lengthy summer vacations for proposal staff and be ready for compressed schedules

Jessica Butturff
703-786-1841
Jessica.Butturff@dwpassociates.com

Jonas Marrello
631-398-0502
Jonas.Marrello@dwpassociates.com

Kelly Moore
757-510-1111
Kelly.Moore@dwpassociates.com

 

April 2023 – Vol. 12; Issue 4

DWPA Staff on April 1, 2023

Planting the Seeds of a Sustainable New Brand

  • Post-merger branding is always difficult, but with the help of PMI best practices, you can cultivate a win-win brand solution
  • Hiring neutral 3rd party consultants to conduct brand research and provide data-driven suggestions helps mitigate ego and emotion
  • The relative strength of both legacy brands must be considered along with possible combinations and novel elements
  • Collaboration and transparency are critical to determining the ultimate go-forward brand and helping to ensure widespread buy-in
  • While design is important, the brand must also embody the combined organization’s shared values in order to grow and thrive
  • Rebranding is never easy, and sometimes appears self-evident, but getting it right can be critical to achieving the shared strategic vision

Cross-Pollination

In any acquisition, a key consideration is post-closing branding. Will the buyer take a “to the victor go the spoils” approach, or will there be a new brand created that reflects both legacy companies? Whatever the outcome, it is critical to be transparent with the process and execute the rebranding as soon as possible after the transaction closes. The process of branding/rebranding needs to mitigate egos, emotions, and pride of ownership. Bringing in a neutral third party to survey the market, assess relative strengths in a dispassionate way, and facilitate branding discussions can help ensure a good outcome. This is especially true when two strong brands come together, as was true with Deep Water Point and Wolf Den. As thought leaders and seasoned practitioners in federal M&A and post-merger integration (PMI), we know the importance of succeeding in this area, and that the process we followed to create our new brand is a case study in PMI best practices.

Grafting Rootstock

While at first glance our new brand may seem fairly obvious, it represents the result of a thorough, data-backed process that involved hiring a third-party consultant to “test the soil” and conduct primary research into relative brand strengths. Going into our branding strategy, we thought we would sow the seeds to create a completely new brand that represented the best of our legacy organizations. However, cultivating seeds requires you to remain flexible and adaptable and research showed that the strengths of the two brands warranted refreshing one legacy brand as opposed to discarding the brand equity of both legacy organizations. Based on overwhelmingly positive feedback from customers and federal government executives, it was clear that the right decision was to graft a refreshed brand onto the strength of the legacy rootstock. In this way, we preserve the strength of our reputation and brand awareness, while repositioning the new brand for the broader scope of our combined capabilities.

Deep Water Point & Associates merger infographic

Roots Run Deep

Our third-party consultant ran the numbers and found that 100% of those surveyed indicated our merger was favorable. Furthermore, 90% believed that the two companies’ offerings were complementary (not overlapping) and 87% thought the companies were stronger together. Additional data showed >75% of respondents agreed both companies held strong positive brands. Based on this data, we embarked on a collaborative effort to incorporate legacy roots into the design of our new logo. Existing brand elements such as the wolf paw print and the lighthouse were considered, but ultimately proved too inflexible. We also considered both legacy fonts as well as a host of new ideas in an effort to modernize two logos that had not changed in two decades. Finally, we considered the entire spectrum of color combinations in order to visually merge the two legacy brands while also standing out from a garden of red, white, blue, black, and gray consulting logos.

Bud Break

The choice of teal and orange pay homage to Wolf Den’s teal presentation templates and Deep Water Point’s pervasive use of orange. The ultimate font choice is deliberately modern, fresh, without serifs, and reinforces our emphasis on future growth. Our final logo was designed to reflect a double meaning. The image displays a diamond eye with an arrow and embedded chevron. This is meant to convey that our companies are greater together and displays our shared passion for helping organizations move forward in the federal market, with the benefit of our strategic vision. Lastly, incorporating “Associates” is a nod to the legacy Wolf Den spirit of collegiality and the “best idea wins” ethos while the use of the ampersand foreshadows future acquisitions and the intent to incorporate them under our broad brand appeal to yield bountiful results for all customers. Growing doesn’t mean you abandon your roots, and our combined DWP&A remains dedicated to our core values, mission, and passion towards our work and our clients.

Branding Considerations That Did Not Grow Roots

  • Keeping a legacy brand of Deep Water Point or Wolf Den Associates
  • Creating a new name with subtle legacy references such as Alpha Point or Orca (the “Wolf of the Sea”)
  • Trying to blend legacy names with ideas like Wolf Water, Den Water, Deep Water Wolf, and Wolf Point
  • Combining legacy logos, such as having a lighthouse with a wolf paw in the beacon or a wolf on the rocks of a lighthouse
  • Incorporating the colors purple and green, which is more likely to invoke the Green Goblin than either company
  • Using legacy fonts in the branding, logo, and templates
  • Selecting a one-word moniker (e.g. Apple, Casper) that seems casual, incidental, and unrelated to the company and its work
  • Developing a new portmanteau, such as Growthtum or Alightage, based on phonetics and obscure aspirational imagery

Kim Pack
571-318-0328
Kim.Pack@dwpassociates.com

Howard Seeger
443-517-7820
Howard.Seeger@dwpassociates.com

Jessica Butturff
703-786-1841
Jessica.Butturff@dwpassociates.com

April 2023 – Vol. 12; Issue 𝜋

DWPA Staff on April 1, 2023

Procurement Reform Takes Center Stage in 2024 Budget Request

  • The 2024 Presidential Budget Request addresses widespread frustration with the current state of federal procurement delays and protests
  • At the root of the problem are understaffed and inexperienced procurement teams that cannot make timely awards and are easy protest marks
  • Widespread adoption of emerging technologies can and should be used to streamline both RFP generation and proposal evaluations
  • From “loser pays” to stays of incumbent performance, to limiting the number of protests, there is plenty of low-hanging fruit in protest reform
  • Reconstituting the procurement force that has been ravaged by retirements and remote work remains a top priority in the 2024R budget
  • Accessing non-traditional pools of talent and embracing innovative technologies are the best ways to restore the glory of federal procurement

Current State of Affairs

We have seen the struggles. They are real. Since the advent of COVID-19 and with the move to remote work, procurement shops are having more and more difficulty getting their work done. These procurement shops are often understaffed and the technical teams that help them write and release RFPs are also working remotely, with their job and procurement demands far exceeding hours in the day. This has driven contract delays as procurement shops struggle to release RFPs on time and to release them with consistently high quality. Delays are compounded by the Sisyphean attempts to slow down and “protest proof” procurements, only to have many protested anyway. According to the FY22 GAO report, the number of protests has gone down year-over-year, likely as a result of delays. At the same time, the effectiveness rate where the protestor obtains some sort of relief has reached an all-time high of 51%. Nobody is happy.

Efficiency Gains

To combat these challenges, the government has attempted to drive efficiencies. Contract consolidations and scorecard evaluations are response to the need to lessen the burden on procurement teams, but these are mere band-aids over bullet holes. The 2024 Presidential Budget Request includes several initiatives aimed at achieving real efficiency gains. To combat the attrition in the contracting officer community, the 2024R budget proposes broad use of ChatGPT and other emerging AI/ML tools to automate RFP generation. While this promises to dramatically decrease RFP cycle times and improve writing quality, efficiency gains are most sorely needed in the proposal evaluation process. Where early OCR efforts to automate scoring met with mixed results, the 2024R budget proposes sweeping reforms to the evaluation process, to include crowd sourcing, web-based polling approaches, and – a particular favorite of the Biden administration – borrowing the Social Credit System that the PRC has proven to be a best practice.

Force reconstitution by source chart

Protest Reform

As no real procurement process improvement can be had without protest reform, the 2024R budget promises the most sweeping changes since establishing the OFPP in 1974. For starters, introducing “loser pays” terms to the protest ecosystem would dramatically cut down on the number of frivolous protests. Similarly, changing the default setting from allowing incumbents to continue performing work in the wake of a timely protest would erase the overwhelmingly positive net present value of a protest and make incumbents think twice. The 2024R budget goes further still, borrowing some commercial innovation from Roger Goodell and limiting bidders to a maximum of two “challenges” per fiscal year. Taking a page out of the Fairfax County Public Schools handbook, the 2024R budget proposes to cut down on protests by no longer notifying winning bidders, so as not to hurt the self-esteem of losing bidders and would-be protestors.

Reconstituting the Force

The third leg of the procurement improvement troika is immediately reconstituting the force. Unlike the false claim that the IRS would be hiring 87,000 agents, this surge is real. Procurement staffing is at 1970s levels and the 2024R budget calls out the need to hire nearly 100,000 contracting officers, COTRs, and legal specialists. Attracting this talent in a tight labor market – and ensuring they are the most diverse work force – will require tapping non-traditional talent pools. While Buy American mandates forbid offshoring, opportunities abound in sourcing procurement talent from the ranks of recently displaced tech workers and treasury managers at SVB. Relaxing citizenship requirements and prohibitions on felonies will also enable procurement nearshoring opportunities along the southern border, in Martha’s Vineyard, and from prison populations. Finally, the Administration will harness the power of the Gig Economy with on-demand staffing from the new procurement app, “Güber.”

2024R Initiatives to Improve Procurement

  • Contract consolidation to reduce number of procurements
  • ECPs and contractor-requested mods to be considered in option exercise decisions
  • Real-time, interactive orals sessions (scenarios, test problems) to replace formal, overly rehearsed oral presentations
  • ChatGPT and other AI/ML tools to expedite RFP generation
  • Replacing detailed cost props with list of top five executive salaries
  • Adoption of ultra-streamlined protests akin to the new MLB pitch clock – protests limited to 5 pages and adjudicated in 5 days
  • Crowd-sourced approaches to streamlining evaluations
  • Past performance and CPARS replaced with Glassdoor rankings
  • Paint by Numbers RFP templates to lower the hurdle for bidders and reviewers alike
  • Screening key personnel by Wonderlic scores to minimize impact of creative resume writing

April
203-585-4577
will.halloran@wolfdenassociates.com

Fools’
202-205-8800
Fools@dwpassociates.com

Day
800-488-3111
Day@dwpassociates.com

March 2023 – Vol. 12; Issue 3

DWPA Staff on March 1, 2023

The Big Dance Returns: 2023 Federal M&A Bracket

  • In 2023, we expect fans to continue to view public, high-seed ADG teams as good defensive positions
  • M&A efforts will focus initially on critical capabilities and customer presence, with contract vehicles becoming important later in the year
  • We predict more teams, particularly publicly-traded buyers, will turn to the M&A transfer portal to supplement 2023 performance
  • Increased investment in small businesses will likely disincentivize those players at the margin from entering the NBA in 2023
  • The lack of mid-tier teams will split PE betting between F&O blue bloods and SBSA Cinderellas
  • Investors will pay up for increasingly scarce top seeded teams and then dollar-cost average via lower seeded bolt-ons and tuck-ins

Analyzing Our 2022 Bracket

Grab your pen and paper and crack open a cold one: it’s time to fill out the 2023 federal M&A March Madness bracket. Unlike most professional “Bracketologists,” let’s reflect on what we got right and wrong in 2022. We correctly predicted strong recruiting for the hottest talent (AI/ML, Cyber, Cloud), which is likely to hold steady. However, this year we expect M&A efforts to focus on critical vehicles over capabilities or customers. As NCAA TV contracts end and key recompetes loom, teams will be looking for deals to join big money BIC/IDIQ conferences (e.g., Alliant 3, OASIS+, CIO-SP4). We incorrectly predicted lower public company valuations as recessionary fears drove investors to the security of ADG stocks, pushing these shares to close 2022 at or above 2021 price levels.

M&A Transfer Portal

Beyond acquiring critical contract vehicles, we expect strategic acquirers to turn to the M&A transfer portal to obtain strong players to pull growth forward into 2023, rather than disappointing boosters. Legacy consulting firms remain the most aggressive recruiters of scarce/in-demand capabilities to enhance their federal IT roster. We also expect international players to work their ways onto U.S. rosters, as geopolitical concerns drive the desire to increase exposure to the world’s largest defense budget. While the M&A transfer portal peaked in 2021, there continues to be high activity consistent with previous years. However, remember that the NCAA likes fair competition. Power conference teams should be aware that they are being scrutinized for any potential recruiting (antitrust) violations, which could lead to severe penalties for those who aren’t closely following the rules.

2022 vs. 2023 volume and valuations impact infographic

Delayed Graduation to the Big Leagues

Extended eligibility for small businesses will likely increase future draft stock and disincentivize would-be sellers from entering the draft early. Now that the NIL offers players endorsement opportunities and the government provides heightened SBSA ceilings, small businesses are incentivized to stick around for an extra year or two. In 2023, we predict would-be sellers to delay coming to market for another year to maximize their NBA draft stock. As small businesses gain more playing experience in the form of past performances, and as they mitigate small business transition risk, their draft stock will increase with investors. Additionally, a split Congress is unlikely to pass any tax changes, which in former years would have sent sellers rushing into the draft prematurely.

PE Bracketology

Given the lack of actionable mid-major (>$100M) assets, we predict private equity brackets to be bifurcated between paying premiums for less risky, F&O “blue blood” teams or picking several lower-seed SBSAs to outperform their peers in the tournament challenge. In strict “Calcutta” terms, investors can spend the same money to get the #1 seed or get all four #9 seeds. Neither strategy guarantees success, though private equity owners must be cognizant of the SBA’s affiliation rules when betting on a confederation of small business teams, as they might ultimately face a tougher draw than anticipated. This year, we expect private equity funds to continue to pay up for their initial entry into the bracket – especially for those scarce nine-figure platforms – and then dollar-cost average their investment through bolt-on and tuck-in acquisitions to craft a winning bracket.

Top Questions Facing the 2023 Federal M&A Court

  • When will dim budget prospects post-2024 dampen M&A activity?
  • Will tribally owned teams continue to be aggressive recruiters?
  • Will understaffed and underperforming procurement teams across the board slow down awards and delay supply of sellers?
  • When might the public/private valuation curve invert again in the federal sector?
  • Will interest rates stabilize and even recede as the economy cools in 2H23?
  • Can decreased supply of good candidates increase transaction multiples in 2023?
  • At what point will the combination of budget pressures and higher interest rates negatively impact valuations?
  • We may have seen the end of SPAC recruits, but when will the activist shareholders descend?
  • Are there any pending system shocks – banking confidence, looming debt ceiling showdown – which will upset everyone’s tournament brackets?

Marty Brennan
703-587-7454
Marty.Brennan@deepwaterpoint.com

Charlotte Brewer
404-858-6974
Charlotte.Brewer@deepwaterpoint.com

Kevin Robbins
202-841-1085
Kevin.Robbins@deepwaterpoint.com

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