After federal contractors acquire government contracts, some of them seek an exit strategy structuring a merger and acquisition of the company. However, when compared to the traditional commercial practice, when there are existing government contracts involved, buyers and sellers should beware.
Merging companies and acquisition of existing businesses can enhance the future growth of a corporation. However, there are several aspects of the business transaction which must be carefully reviewed. For example, when contract novations are contemplated, the Federal Acquisition Regulations have unique requirements. Many companies underestimate the authority of government agencies to accept of reject already-executed business transactions.
Merger and acquisition are some of the most effective ways to compile and merge resources and develop growth.
Companies contemplating a merger or acquisition should perform in-depth due diligence and background inquiries. A common situation is when government contractors engage in buying or selling of businesses with existing government contracts.
Not only do business owners have to perform normal inquiries in addition to making sure that the business transaction meets government contract regulations.
Basics of Merger and Acquisition of Government Contractors
Companies often buy and sell their companies when they are doing extremely well or when business owners seek an exit strategy. Small business must be particularly careful when buying or selling a business as a government contractor. There are strict affiliation rules that must be reviewed when looking at government acquisitions and assignment of contract rules.
Existing government contracts become a huge concern to both buyers and sellers of a business. There are specific government regulations that address whether a government contract can be sold as an asset. Find out about the rules on execution a novation agreement in government contracting.
The issue of drafting novations becomes yet another important concern when engaging in mergers and acquisitions. When compared to the commercial sector, government contracting regulations have more strict rules.
- Always get professional legal guidance before entering into an agreement.
- Get the appropriate guidance to comply with small business regulations.
Government Scrutiny: When companies engage in mergers and acquisitions of government contractors, there is some level of reduction in competition. Therefore, the government often scrutinizes these corporate transactions. This is especially true in the healthcare industry and telecommunications industry.
Colorado Businesses Commercial business transactions require detailed analysis of the pros and cons associated with consolidating Colorado businesses.
For example, although one of the merging companies might be currently making huge profits, your merger and acquisition attorney should also look at the future possibilities. In Colorado, various industry markets continually change.
- Expected market trends can be essential to a merger.
- Various industries experience drastic changes due to unexpected market changes.
If you are a government contractor interested in government acquisitions or Colorado business entity contemplating merger and acquisition of government contractors or existing companies, call our business law and government contract attorneys for a FREE INITIAL CONSULTATION.