H&K Strategic Business Solutions Selling Your Government Contractor Business Douglas Rodgers Special Briefing The McLean Hilton October 3, 2001

H&K Strategic Business SolutionsH&K Strategic Business Solutions

Selling Your Government Contractor Business

Douglas Rodgers

Special BriefingThe McLean Hilton

October 3, 2001

Holland & Knight Consulting Strategic Business Solutions


SBA 8(a):How Can You Monetize True Value?SBA 8(a):How Can You Monetize True Value?• In a sale, buyer may not step-up the asset value in charging

overhead costs to cost-reimbursable contracts.

• In a sale, if the seller retains the pension plan, the government will claim its "share" of the amount by which the plan is overfunded. If the plan is underfunded, the contractor can charge the government its share of underfunding.

• In a sale, SBA 8(a) contracts may not be transferred to a non-8(a) company. They must either be retained by the seller or sold separately to another 8(a) contractor (requires SBA and contracting officer consent).



Continuum of Transaction TypesContinuum of Transaction Types

SubcontractingShared resourcesand competencies

(non-equity)

Partial acquisitionnon-controlling

(non-equity)<=50%

Joint Ventures

Partialacquisitioncontrolling

>50 %

100%Acquisition

Increasing Degree of Integration

Corporate Alliances Traditional M&A

CollaborativeESOP or Strategic

Third Party or MBO



Determine Your ObjectivesDetermine Your Objectives

• Timing

• Lifestyle

• Financial




• Timing– Preferences--Shareholders and Management.

– When Market is Ripe.

– Seek a Professional Opinion.




• Owner Lifestyle Post Transaction:– Long term full-time position.

– Limited term full-time position.

– Short term full-time position.

– Limited involvement - board member or advisor.

– No involvement - retire or move on.




• Financial– Maximize Potential Proceeds = Higher Risk.

• Earn out provisions.

• Retain minority interest.

• Equity/stock in acquirer or merged company.

• Cash and unsecured debt.

– Minimize Risk.• All Cash.

• Cash and cash equivalent.

• Cash and secured debt.



Execution StrategyExecution Strategy

• Market the Company While Operating.• Delegate Operating Role and Devote Time to

Creating a Transaction.• Hire a Financial Intermediary.



Steps for A Successful TransactionSteps for A Successful Transaction

1 Study Company and Determine its Strengths and Weaknesses.

2 Determine Objectives and Priorities.3 Agree on Expectations:

– Range of Values.

– Types of Transactions.

4 Prepare Offering Memorandum.



Steps for A Successful TransactionSteps for A Successful Transaction

5 Identify and Contact Transaction Candidates.

6 Short List Prospects and Begin Dialogue.

7 Negotiation and Due Diligence Phase.

8 Closing Transaction.

Documents

H&K Strategic Business Solutions Selling Your Government Contractor Business Douglas Rodgers Special Briefing The McLean Hilton October 3, 2001