5 Thoughts 5 Days From Election Day

On Tuesday, November 6, our Nation’s citizens will once again exercise their right to vote. Since we focus on government contracting at Oxley Consulting, we’re keeping a close eye on Congressional and Gubernatorial races across the country - because ultimately they have a great effect on budgets and thus strategic buying decisions. Five things you and your company ought to think about in the next few months before the freshly elected are sworn in:

1) Most national poles indicate Democrats taking control in the House and Republicans maintaining or slightly growing their Senate majority. A bi-partisan, bi-cameral legislature is good for America, according to our forefathers, as well as the last century of economic indicators. Encourage your employees to vote, and actively engage your legislators (Federal, state and local) in order to promote legislation beneficial to your industry.

2) 2019 will start off in Congressional gridlock and oversight investigations, but will end with the President and Congress coming together to pass several rational yet earthshaking pieces of legislation - specifically tamping down prescription drug prices and rebuilding our Nation’s infrastructure. We may see Medicare and/or Social Security reform too - eliminating benefits for the “rich” creating means testing for the lower 30%.

3) The Defense Department and Veterans Affairs will continue to be the most well funded agencies, no matter who is in charge. First, they have an outstanding funding lead on all other Cabinet agencies, but it is also political suicide to mess with either. Government contractors will be well served to transition part of their focus toward these agencies from their commercial / civilian focus. Diversify!

4) We remain very bullish on the SBA’s All Small Mentor Protege Program and the new Opportunity Zone regulations currently under scrutiny. There are more business owner Members of Congress than ever before - and thus far fewer of the typical lawyers - so look for your Congressman to start levering these key small business firestarters in order to spur further growth in their home states.

5) Twitter is not your friend. That which appears on the internet, stays on the internet.

That’s a wrap for tonight - best of luck to the most pro-business, pro-government contracting candidates out there!

5 Steps to Acquire $100m in New Revenue for Less Than a $5m Investment

May 8, 2018

5 Steps to Acquire $100m in New Revenue for Less Than a $5m Investment

The SBA’s new All-Small Mentor Protégé Program (https://www.sba.gov/federal-contracting/contracting-assistance-programs/all-small-mentor-protege-program) is nearing its 18th month of existence. The previous program only allowed 8(a) minority-owned businesses to participate with large prime government contractors – these limitations and other factors made the program widely unappealing. However, as per its name, the All-Small MPP allows for every small business designation (Women, Veteran, HUBZone, regular small, etc) to participate and win contracts that they may not have been able to win without the help of a larger, more experienced partner.

Further, the new Program allows for the Mentor to invest upwards of 40% equity in the Small Business without incurring any affiliation limitations on the Small’s size (13 CFR 122.103 https://www.sba.gov/sites/default/files/affiliation_discussion.pdf).  Joint Ventures are formed between the Mentor and Protégé to acquire new government contracts, and the JVs maintain the status of the Small Business – a huge benefit to both participants which does not apply to regular teaming agreements outside of the MPP.

Thus, government contractors in growth mode are wise to strongly consider the All-Small MPP for its most pleasant unintended consequence: The Best Mergers & Acquisitions Platform In Government Contracting.  Consider this five step illustration:

1.      Large Prime contractor vets and agrees to mentor a Small Veteran-owned company with $10m gross revenues / $2m EBITA. Companies apply to SBA and are formally approved under the All-Small Mentor Protégé Program.

2.      After due diligence, Mentor agrees to invest the maximum allowed 40% equity in the Protégé based on $2m EBITA at a 2x multiple. $2m x 2 x .40 = $1.6m equity investment.

3.      Joint Ventures formed by the companies can attack opportunities with joint past performance as a small business. Agencies are encouraged to do business with smalls, particularly under $5m contract values. Thanks to strong work ethic and capture strategies, the JVs formed by the Mentor and Protégé win $100m in forward looking revenue over the next 5 years (approx. $20m of task orders per year).

4.      A 50/50 workshare is established, equating to $10m of annual gross revenues for the Small, doubling their revenues and adding another $2m of EBITA.

5.      For the Mentor to earn majority ownership on a $4m EBITA valuation at an improved 4x multiple, the Mentor would be required to lay out an additional $1.76m for the next 11% (51% total) of the company. Total Mentor investment: $3.36m for $100m of total revenue.

I encourage you to reach out to us to learn more. You’ve always wanted to find the right teaming partner with which to earn more government contracting business. Do it the most expeditious and potentially lucrative way by leveraging the SBA All-Small Mentor Protégé Program to your long term advantage.

** Caveats: This article is for demonstration purposes only. Your actual mileage may vary. Yes, the Mentor is more likely to request the maximum 60% workshare and, yes, the Protégé is likely to value their business higher due to these new revenue streams. But even if you double the Mentor’s total asking price, where / how else can you buy and fully integrate a company into yours for less than 7% of its nearly guaranteed forward looking revenue?

Elvis Oxley, all rights reserved.




It's a new day in government contracting

As many of you have noted and cheered, Oxley Consulting is back and fully up and running as a stand-alone entity once again. A brief hiatus emphatically underlined to us 1) we prefer to work with honest people; 2) inclusivity and teamwork will always trump exclusivity and family-only; and 3) Washington, DC will always be a small town, so reputations mean everything. 

We are halfway into the federal fiscal year and Congress will vote on a $1.3T omnibus spending package this week. Friends, especially at DoD and VA, have remarked that they have no earthly understanding how they can spend all that money in six months. Some traditional spending rules (the Pentagon's 80/20 split, for instance) will be bent in order to accommodate the influx of funds. Hopefully, key objectives like military readiness, physical security upgrades, cyber security preparedness, and staff training will be paramount on the list. If your firm doesn't have contracting vehicles in place, contact us to discuss how you can quickly set yourselves up for success in this flush contracting environment. 

Finally, we are very pleased to share our focus on SBA's All Small Mentor Protege Program (MPP). The MPP is not only a great way for small and large businesses to effectively partner to achieve more contracts, but it is the single best M&A system in the world. Truly! What other system allows a large company invest up to 40% equity in a small company; allow for Joint Ventures that take the form of the small and the past performance of the large - thus increasing the potential for awards; and the opportunity for the large to purchase an additional 11% or more once the small is flush with new contract revenue. Obviously, greater details lie within, so contact us for more strategic information. We're working on three MPPs right now.

Thank you for your continued support and teamwork. Let's get some wins together!

Kind regards, Elvis