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May 9, 2008


The Great Entrepreneur Search! We'll be announcing and profiling our much trumpeted "35 Under 35" shortly. Thanks to great anchor sponsors Deloitte and Greenberg Traurig as well as Cabot Consultants and Comerica, and media partner Fortune Magazine. To judges Phillip Merrick, Mary MacPherson, Mike Daniels, Mario Morino, Dendy Young, and Scott Frederick. And to Valhalla's vc-to-the-stars Gene Riechers for hosting winners, guests, and sponsors at his home June 10!


We continue our roundtable at Tysons McCormick & Schmick's, featuring the heads of three Federal IT players.

  • Stan Sloane, CEO of SRA;
  • Shiv Krishnan, CEO of Indus; and
  • Paul Leslie, President of Apptis

The lunch also featured beloved sponsors: Harry Klaff of commercial real estate giant Jones Lang and Ed Schiff, M&A specialist and DC managing partner of law firm Sheppard Mullin.


Bisnow on Business patriarch Mark Bisnow queries guests about consolidation in the federal IT world. Ed and Stan listen with varying degrees of amusement.


Are we going to see accelerated consolidation of government contractors?

Paul: Consolidation will continue for a number of years. There are two major factors related to M&A activity and consolidation in our space today.  First are the economic factors, and second is the small business legislation passed last June by SBA that allows small business contracts to be recertified when a company gets acquired. It's a horrible piece of legislation because it goes against the foundation of capitalism. It's forcing small businesses to figure out ways to stay small rather than grow and be successful.

Paul Leslie practicing a karate chop.


Even though we're past the timeframe for the implementation of that particular statute, we haven't seen a slowdown in M&A activity, especially in greater Washington.

Paul: You look at small business growth, and a company getting acquired should be considered a great success. Someone thought highly enough of its ability to grow their business that they acquired them. But if a company grows out of the small business program, now they're penalized because they can't compete for the small business revenue dollars and have to compete with the SRAs and SAICs.

It introduces another layer of risk. The acquiring companies aren't going to pay what they would have paid before because now there's additional risk. And for what reason? These are high-performing companies delivering excellent service to customers. And the whole idea of capitalism, the idea of supporting a really vibrant small business program is to create strong midsized and large businesses that can compete with other businesses to deliver best value for tax-payer dollars.


Shiv says the government is taking away the value of small businesses that it once helped to create.


Do you see this changing entrepreneurship? 

Shiv: Absolutely. Joe Kampf, former CEO of Anteon, said as soon as this legislation came out that entrepreneurs of thriving small businesses ought to be up in arms, revolting against this rule because it takes away the value that they've worked to create through years of sweat and blood.

As a result, do you see more teaming agreements between small and large companies?


It's very difficult when you have teaming agreements. You're introducing complexities in terms of two different teams of people working together. It also impedes the flow of the value and supply chains as companies grow from small businesses. SRA was a small business at one time. SRA was a $100 million thriving mid-sized business and now is a $1.6 billion company.

Bisnow: Is SRA involved in this debate? 
Stan: Yes, but I need to put a little different stamp on it. In the small business program, I think taxpayers get less value when the government is indiscriminate and just throwing money out there. A small business that doesn't have a differentiating strategy has a very tough time. So the trick is: How do you stimulate the development of differentiating capabilities?  As an acquirer, I'd be interested in something that differentiates itself in the marketplace.

David Stegon is Bisnow's tech guru. He loves to hear compliments, complaints (not really), and story ideas. Call him at 703-674-7718 or shoot an email to David@Bisnow.com



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