John Song and Jean Stack, managing directors with Baird, recently spoke with ExecutiveBiz regarding the organization’s recent efforts within mergers & acquisition (M&A), following the close of NuWave’s acquisition of BigBear and Jacobs’ recent purchase of The Buffalo Group. The two leaders also discussed current market trends, and provided insight into Baird’s upcoming Government & Defense Conference.
“Buyers are buying very strategically. They are buying into markets that they see the growth markets to be in the future. The reason there’s so much activity today is there’s a greater supply of assets,” Jean Stack noted.
ExecutiveBiz: Following Jacobs’ recent acquisition of the Buffalo Group, what are the most effective ways that companies are expanding their government missions across cyber, space and other areas in the federal sector?
John Song: “In the government space, it’s really about transformation. The rate of how technology evolves is so fast. Businesses that stay ahead of the curve and develop innovative approaches to very complex problems are companies that will do very well in this market environment.
From a M&A perspective, buyers are absolutely looking for those very high speed, technologically oriented businesses that are able to solve these very complicated and hard problems. That has really been the mainstay for a lot of this activity that you’re seeing today.”
Jean Stack: “There’s a lot of investments in Research & Development (R&D), such as the development of technologies that are aligned with the future of the government and its core mission sets. For buyers, it is really a question of: do I buy it or build it?
If it’s already been built, and it’s been built effectively, it’s often more effective to acquire a technology that’s been built over many years of investment than it is to start fresh. You always have that buy or build strategy approach.
The government is headed toward cyber, space, hypersonics and 5G. and all of those things. These are the priorities, whether they be internal development, through venture capital arms, or whether they live in M&A.”
ExecutiveBiz: What are the current M&A trends and top market value drivers that are impacting federal agencies and the federal sector overall?
Jean Stack: “Companies are looking for repeatable scalable business models that enable them to grow and build things alongside their customers. If you operate within the information technology (IT) landscape, you have to build frameworks, innovation, code challenges and human capital that are scalable, drive success, and leverage that ability to do things better, faster and cheaper.
Within the product field, there is an emphasis on innovating and developing quickly to enable the ability to leverage offerings that have already been built, or to take best of breed technology that already exists to enhance a system or sensor.
It is no longer about putting bodies on contract. It’s too expensive, it’s arcane. Now, it’s about how to deliver a better solution that’s more efficient and more effective than the old way of doing things.”
John Song: “I would say that buyers right now are recognizing that the business of government is evolving and changing. The government realizes their traditional ways of procuring services and products are rather outdated and slow. If you have a specific RP that’s trying to incorporate today’s latest technology, by the time it is awarded, that technology is too old.
What buyers are actually looking at are those companies that have been able successfully engaged with the government and these new models. For example, a managed services model is an emerging, cost-effective way for the government to outsource functions to a contractor and have them be responsible for incorporating new technologies in delivery of its services.
OTAs have been very successful in introducing innovation in a very quick manner. Buyers are looking for that because it demonstrates their ability to create innovation for mission critical applications.”
ExecutiveBiz: What can we expect from Baird in the future as we head into a post COVID-19 world in 2021?
John Song: “In one way, we will work to rehumanize the M&A process. Post-COVID, what people are generally looking for, and has taken a tremendous hit with our new virtual world, is the chemistry and connection of people.
We’re going to refocus, in terms of our practice and improving our processes, on humanizing our processes so that you’re connecting people much more directly, not necessarily having a virtual communication, to allow for interpersonal interactions between buyer and seller.
On the positive side, COVID-19 has helped us realize that our connection can be immediate. There’s no reason to have geography be in the way of us communicating and getting together.”
ExecutiveBiz: What can you tell us about Baird’s upcoming Government & Defense Conference on Dec. 10th?
Jean Stack: “While I wish it could be in person, the lineup that we have is absolutely amazing. We have the topics of the industry, spanning from the race for space, electronic warfare, healthcare, key trends and market drivers, and the innovation in government. We will feature industry and government leaders across many panels.
We will provide an equity analyst view and discuss M&A environments in the governance and defense space. David Berteau, president and CEO of the Professional Services Council (PSC), will discuss budgets. We also have great insights from the M&A professionals within some of the most valuable companies that will discuss deals.”
John Song: “What’s great about this conference, and what we’ve been able to build, is that there is a strong desire for companies to participate. We have large, public companies such as SAIC, Kratos, ManTech, and Ultra Electronics as well as emerging private companies such as AMERGINT Technologies, Gryphon Technologies, and Peraton.
We also have a lot of participation through our panel discussions as well. They’re very deep in terms of information and topics that they’re covering, featuring people from Leidos and Lockheed Martin.
What’s most interesting is the willingness and interest level that we have from senior government officials. Their wisdom and knowledge that they have received during the course of their service within the government will provide a fascinating perspective to our conference.”