Preparing for the ‘When’ with Mergers & Acquisitions – Investing in Robust Business Systems

Posted by Jessica Shirk on October 23, 2020

System Investment for Mergers and Acquisitions

By Jessica Shirk, Product Marketing Specialist, Deltek

Merger and acquisition activity within the government contracting market has been consistently strong over the past several years. Findings from the 11th Annual Deltek Clarity Government Contracting Industry Study reflect a high level of interest pre-COVID-19 from companies of all sizes, and though firms are exercising caution because of the uncertainty of the pandemic, causing a noticeable activity slowdown, many indicate they are open should an opportunity arise.

Preparing for a merger or acquisition within the government space often begins long before an offer is on the table. It actually starts when solutions and systems are selected to help run a business’ day-to-day operations. What firms put into place to manage their accounting and finance, contract lifecycles and human resources, for example, factors into an organizations overall valuation as much as the product or service they provide.

Becoming a Beacon for Talent

Having a well-known and trusted solution, like Deltek Costpoint, helps firms to attract top talent and expand their pool of options. Many in government contracting have worked or interfaced with a variety of systems and solutions. But, when they are fully familiar with and trained on Costpoint, it automates much of their work and better ensures the quality of their data and reporting. Those seeking employment opportunities in the market can list their solution knowledge as an asset when speaking with businesses and likely will pursue positions that execute on those capabilities; making an organization a beacon for upwardly mobile and experienced talent. With a high performing team in place, that is a big check in the pro column for firms that either want to acquire or sell.

Streamline Versus Patchwork

Integrated technology solutions that include a standardized financial, project accounting, and customer relationship management (CRM) system with flexible, detailed reporting frees companies from previously manual work, reduces errors and, when the time comes, makes entering into the due diligence period with a merger or acquisition a much smoother process. Having one system to manage the full scope of work in government contracting makes the flow of information within an organization, indirect costs for example, much more reliable.

Due diligence accounts for 60-70% of a merger or acquisition transaction. It can be a major hurdle for small or medium-sized businesses managing with a patchwork of systems that may not be fully aligned. Often the same growth and profitability that made them an attractive target to buy or sell can render their legacy systems obsolete or a potential problem for the future owner. An integrated enterprise resource management solution (ERP), like Costpoint, aids with due diligence through:

  • Flexible, relevant reporting
  • Virtual data – easier to move and share
  • Cross functional mapping – human resources connects to time and expense, which connects to project management.

Sweetening the Deal

Successful mergers and acquisitions can add beneficial new skill sets and capabilities that provide a much faster return than developing capabilities internally. Therefore, small-to-medium sized businesses providing highly specialized services can be very attractive targets. Keeping in mind that a merger or acquisition is a distinct possibility in the tightly regulated government contracting space, having confidence in a firm’s solution selections is important for the bottom line. At the end of the day, these solutions make a seller more attractive and buyers more confident.

Putting a solution like Costpoint into place helps businesses to improve the data detailing past performance. It streamlines functions like indirect costs, improves cash flow, produces real-time, accurate information, and is well known by auditors from oversight entities, such as the Defense Contract Audit Agency (DCAA) and the Defense Contract Management Agency (DCMA). In the simplest terms, having an integrated ERP solution helps contractors have confidence in their business today and is an investment in the future value of an organization for tomorrow.

Next Steps

Take some time to look under the hood of Costpoint during an upcoming overview session. Walk through the functionality and flexibility of the solution to learn exactly how it can better company value for a business’ merger or acquisition potential.