2014 – WashingtonExec Annual Market Outlook Series
As we turn the page on 2013, we look forward to a new year and new opportunities for innovation and growth in the government contracting community. This past year we experienced budget sequestration, a 16-day-long government shutdown, and a perpetually increasing focus on cyber security and healthcare IT.
WashingtonExec reached out to those most knowledgeable and experienced individuals in the federal contracting space. We asked executives in and around the beltway for insight regarding where they see the government contracting community headed in 2014. Topics discussed include M&A activity, cloud computing, healthcare IT, defense, mobility, and more.
Mark HuYoung is a Managing Partner at Northwind Partners and this year shares his market outlook for the third consecutive year. Last year he predicted growth in cyber, health, energy and budget streamlining initiatives. This year he foresees an increase in the number of mid to lower mid-market deals but says companies will struggle with organic growth:
“The POTUS budget deal is welcomed progress after a long period of uncertainty. It gives the government customers more definition surrounding what they have to work with and, in turn, allows contractors to formulate plans with greater visibility. There is a lot of cash on the sidelines and there are some itchy trigger fingers on the buy side (both strategic and financial). 2014 will definitely see an increase in the number of mid to lower mid-market deals. However, better definition on the defense budget for the out years and greater acceptance of realistic valuations by sellers to close the bid-ask gap will make for a brighter M&A market. Then, maybe we can put our sunglasses back on.
No surprise that organic growth is going to be tougher to come by for most. While the number of truly new opportunities coming out has greatly diminished, organizations can get smarter about winning sideways. It’s analogous to viewing the market like Black Friday every day. Shiny new gaming systems are in very limited supply, and there is always a tremendous battle by the hordes over those few available. It would be wise to seriously assess whether your time and resources are best spent committed to getting that rare new gaming system or taking things out of your neighbor’s cart while they are in the fray fighting for that coveted item. With that said, there are a few bright spots where our firm sees money being directed in the federal markets to include cyber, data analytics, and health IT. International growth has also been a big mandate by many of our larger clients. Aerospace manufacturing, services, and a few select sub-sectors continue to be at full speed as well but it seems like we’ve seen the crest there.
My encouragement to those who have struggled with this season of the marketplace is to share a quote by Marcus Aurelius, “Each thing is of like form from everlasting and comes round again in its cycle”. Hang in there. Things inevitably change, and hopefully for the better.”