2018 Market Outlook: Bob Kipps of KippsDeSanto & Co.

Bob Kipps of KippsDeSanto

We look forward to a new year and new opportunities for innovation and growth in the government contracting community. This past year, we experienced an increased emphasis on big data, insider threat, merging technology with health care, and the internet of things, among others.

WashingtonExec reached out to those most knowledgeable and experienced in the federal contracting space. We asked executives in and around the Beltway for insight on the direction they see the government contracting community heading in 2018. Topics discussed include M&A activity, public/private sector collaboration, cloud computing, the incoming millennial workforce in defense/IT/health care, talent retention and more.

Next in the series is KippsDeSanto & Co Founder and Managing Director Bob Kipps. KippsDeSanto & Co. provides investment banking for growing, mid-sized companies in cybersecurity, intelligence, health IT, aerospace/defense and government services. Here are his insights:

We are very bullish about the GovCon sector for 2018. While once again we have entered a new calendar year with a continuing resolution and shutdown risks, given we are in an election year and facing major national and homeland security threats, a shutdown does not seem likely.

On the brighter side, when an actual Defense Department budget is passed, it will include meaningful defense funding increases. That uplift should accelerate procurement in the second half of GFY 18 and help continue the growth the market has generally experienced over the past couple years.

The M&A market — which last year had its best year since 2012 with over 100 deals — benefits from this broad market confidence and optimism. Valuations of the public companies in this sector (as well as most other sectors right now) remain well above average and at or near historic highs. Similarly, the credit market remains red hot.

These factors have made it where today almost all businesses are thinking strategically — either a buyer or seller. Buyers of all shapes and forms are feeling good enough about their business to make long-term investments (like M&A). Moreover, the budget and valuation environment combined with the perception that the sector may have less economic downside risk, continues to attract new private equity groups to the GovCon vertical.

Businesses on the other end of the timeline are increasingly looking to leverage today’s deeper buyer market and stronger valuations to pursue their exit. In particular, sellers of size with focus and depth with intelligence or Homeland Security Department customers or with NextGen IT capabilities will likely find the above factors have made this year’s M&A market great again for them.

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