Marc Marlin, a director at investment bank KippsDeSanto, believes that the government contracting industry will see companies looking to bolster their market posture and drive business growth through mergers and acquisitions in 2015.
Marlin wrote in a guest piece published Thursday on Federal Times that large, pure-play businesses in fields such as cyber, health, cloud, C4ISR and big data analytics will see the most M&A activity.
This follows a similar M&A outlook in 2014, which saw budget and pricing issues, bid protests, delays in the procurement process and preference programs contracts, he said.
He commented that “revenue synergies, not cost synergies drive M&A value. Cost synergies are a one-time event”
He added that “we anticipate a continued heightened protest environment, procurement delays, budgetary constraints, pricing pressures and preference programs contracts that don’t facilitate transition to F&O.”
Marlin also predicts alternative transactions such as mergers of equals and large contract vehicles facilitating a chain of M&A activity.
“Market dynamics will further enhance the scarcity value of ‘Superheroes,’ presenting a robust opportunity to achieve significant M&A interest and premium valuations,” he wrote.