M&A in the Services Sector

           Government Sector Deal Volume - Whole Lotta Dealin' Going On

Check out these two links:

http://www.washingtontechnology.com/print/23_03/32312-1.html

http://www.washingtontechnology.com/mergers_acquisitions/2007/

The first is a good article discussing the consolidation occurring in the government systems integration sector. The second is a list of deals that transpired in 2007. It's a good list and one that helps put the services M&A activity in perspective.

There's something structural occurring in this space and it appears that consolidation is being undertaken to:

• create additional scale
• create marketing and operational synergies
• broaden expertise in more service areas

There's something else happening, too. Government services contractors are now becoming more distinct from their private sector counterparts. In fact, it's getting rarer to find firms that successfully sell and service both spaces or serve both spaces well. Why? Well, the selling effort has always been different between public and private sectors. But now, service firms need distinct and focused offerings just for governmental entities (think of Homeland Security - It has very unique needs, needs a lot of help and it didn't even exist a few years ago). Moreover, given the high development costs of some offerings, government service providers are realizing that they must have scale to keep costs at their lowest possible levels so as to continue to extend their win rate.