What a buyer asks for first
- Every active contract, with value, end date and options left
- Revenue by contract vehicle and by agency, for three years
- Small business or set-aside status, and what happens to it after a sale
- Employee roster, key personnel clauses and any clearances
- Open recompetes and bids you expect to win or lose
Backlog Is the Story Buyers Read First
A company that earns most of its money from government contracts is valued on what is left to run, not only on last year's sales.
A buyer wants to see how many months of contracted work remain, how many option years the agency can still exercise, and what is up for recompete soon.
A contract that ends in eight months with no follow-on lowers the price today, even if the company looks strong on paper. Show the pipeline honestly, including what you expect to lose.
Set-Asides and Size Status
If you hold work because you qualify as a small business, a larger buyer can change that.
Some contracts require recertification after a sale, and some set-aside work cannot continue with a buyer that is not eligible. A buyer's own size matters as much as yours.
Ask your attorney early which of your contracts depend on status. It can change who the logical buyers are.
Contracts Do Not Simply Transfer
In an asset sale, a federal contract generally cannot be handed over without the government's agreement, through a novation process.
That takes time, and the agency can say no. A stock or membership interest sale avoids a novation for most contracts, but may trigger notices and consent clauses.
State and local contracts usually have their own assignment rules. Build the timeline around the slowest approval.
People, Clearances and Key Personnel
Many agreements name specific people who must keep working on the job. If those people leave at closing, the contract is at risk. Retention agreements for key staff often matter more than any price term.
A facility clearance is tied to the company, and a change in ownership has to be reported to the cognizant agency. Plan for it.
How Buyers Value These Companies
Most buyers use EBITDA once the owner has stepped back from daily delivery.
Multiples vary with backlog quality, how much work is sole source, prime versus subcontractor status, and how much revenue sits with one agency. Concentration of a fifth or more in a single contract draws a discount.
The guide on what your business is worth to a buyer explains the math. Allocation of the price among assets also matters, covered in Form 8594.
Get Ready Before You List
Clean contract files, timely invoices and a current statement of past performance help. So does a second in command who can lead the company. The twelve month plan applies directly here.
When you want a range, ask for a valuation check, free and private.