Small Business Rule Changes Could Impact M&A Activity

Recent changes to the Small Business Administration’s (SBA) regulations requiring recertification of size status by businesses holding certain Federal contracts may affect Mergers and Acquisitions (M&A) activity in the government market. Under the current SBA rules, large companies were able to include in their growth strategies acquisitions of small businesses that were thriving by competing for and winning government contracts set-aside exclusively for small businesses under the SBA’s Small Business Set-Aside Program. There was no requirement for the acquired small business to recertify that it still met the SBA’s small business size eligibility unless the deal resulted in a novation or a name change. The acquired business could continue performing the small business set-aside contracts even though it no longer met the size eligibility requirements, which the SBA estimates resulted in $3.78 billion or 26.6% of the $14.2 billion in small business multiple award contracts being