Despite the recent rebound in the credit and M&A markets, helped in substantial part by record government spending, “the federal budget deficit is exerting tremendous pressure on government budgets and, hence, government contractors,” says a new Grant Thornton release, The government contractor industry: M&A environment and recent deal trends,” (Sept. 2011):
Over the past 12 months, the government services market has underperformed the broader market. Valuation multiples in the defense and government services market have dropped dramatically since 2005 as defense budgets have flattened out, while the broader markets have actually recovered substantially. The rebound in the public markets has taken place at the same time as budget pressures on government contractors have depressed government contractor valuations.
The new white paper came out of GT’s recent Government Contractors’ Roundtable, which produced several summary reports. Of further interest: look for an analysis of government contractors with a “set aside clarification” by Donald W. Nalley (Beason & Nalley) in the next (November) BVUpdate.
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