Due Diligence in Government Contractor Mergers and Acquisitions

Complete Seminar Details

Daily Schedule

Registration: 8:45am on the First Day

Meetings: 9:00am-12:00pm and 1:00pm-4:00pm

CLE Hours

This Course is Eligible for

11.0(60 minute)

13.2(50 minute)

CPE Hours

This Course is Eligible for

13.0(CPE) hours of credit.

Program Level: Basic

Program Prerequisite: None

Advance Preparation: None

Method: Group-Live

A special two day program for contract professionals, corporate counsel, lawyers, accountants, commercial and investment bankers, insurance professionals, executives and strategic managers, and M&A specialists.

Mergers and acquisitions (M&A) are key business strategies in the domestic and international economic landscapes today. Efficiency, effectiveness, and the need for scarce and special resources continue to drive organizations to acquire the products, services, processes, and intellectual talent they need to compete in the world marketplace. Due Diligence gives buyers, sellers, and merger partners the opportunity to evaluate the true worth of the partners and prospective new enterprise. The unique requirements of government contracts demand that due diligence efforts include an in-depth analysis, assessment and evaluation of those contracts.

Government contracting is an area of arcane and esoteric rules and regulations. A misstep in assessing the true values, exposures and potential liabilities of existing--and old--government contracts could be fatal to your bottom line. Your traditional M&A templates must be supplemented and strengthened. When the acquiring organization is a foreign entity, the potential for missteps is even greater. More statutes, rules, and regulations come into play.

The purpose of this course is to assist you in performing a due diligence analysis when a potential partner has government contracts. A faculty of experienced government contract practitioners will provide you with practical guidance in the conduct of a due diligence analysis. Whether you are a buyer, seller, or merger partner, you will benefit from this comprehensive program.

Coverage includes:

• Novation agreements
• Government discretion/rules & regulations
• Security issues
• Buyer & seller exposure and liabilities
• Cost allowability issues
• Organization costs
• Advance notice and advance agreements
• Defective pricing/False Claims Act issues
• Protecting technology
• Legal and financial analysis

There are few--if any--absolutes in the dynamic area of mergers and acquisition. This course may not provide the perfect answer to each and every situation you face. We are confident, however, that the resources, insights, and guidance you receive will prepare you to thoroughly analyze and evaluate your opportunities and exposure in your M&A activities.

The Course Curriculum

Introduction

The Various Types of Transactions and Their Key Characteristics

• Forms of Transactions
• Stock Purchase
• Asset Purchase
• Merger
• Joint Venture
• The Acquisition "Dance"

General Sources of Due Diligence Information

• Publicly Available Records
• Information Supplied by Company Management
• Investigative Efforts - Inquiries and Interviews

Preparing the Data Room

• Content
• Data Room Procedures

Organizing/Managing the Due Diligence Process

• Introduction
• Concept - Think Proposal Preparation
• Coordination/Cross-Fertilization - Procedures to Promote Sharing of Due Diligence Information
• Interaction With Target Company
• Continuation of Due Diligence Process Through Negotiation, Execution of Transaction Agreement and Closing of the Transaction
• The Special Issues Presented by Classified Contracts

Typical Representations and Warranties in a Government Contracts Transaction

• Financial Statements
• Litigation
• Material Contracts
• Intellectual Property ("IP")
• Employee Benefit Matters
• Government Contracts and Government Bids
• Government Furnished Property or Equipment
• Backlog
• Product Warranties
• Clearances
• Foreign Corrupt Practices Act ("FCPA")
• Other Issues to Consider

Government Contracting - Unique Issues

• Assignment/Novation
• Case law
• Federal Acquisition Regulation
• Agency implementation of the FAR
• When is government approval required?
• Assets transactions (direct transfers of government contracts)
• Mergers and consolidations (direct transfers of government contracts by operation of law)
• Stock transactions (indirect transfers)
• Corporate reorganizations
• Bankruptcies
• How is government approval obtained?
• Scope of the government's discretion to approve or disapprove a transaction
• Mechanics of novation agreement
• If no government approval
• Test of the government's legal authority
• Statutory remedy
• Miscellaneous issues
• Pending bids and proposals
• Subcontracts
• Unique Areas of Risk
• Inefficiencies in obtaining business
• Qualification and eligibility impediments to award
• Responsibility
• Unfair competitive advantage
• Conflicts of interest
• Suspension/debarment
• Bid protest
• Quasi-criminal and criminal restrictions to eligibility
• The statutory offenses
• False Statements Act
• Consent to subcontractors
• Limits on authority of government personnel
• Changes
• Standard "Changes" clauses
• Changes authority
• Contractor's duty to proceed
• Procedures: unilateral or bilateral
• Constructive changes
• Cost allowability rules
• Cost accounting rules
• Government property duties
• Termination for convenience
• Government's convenience termination right
• Termination procedures
• Constructive termination
• Contractor recovery
• Partial terminations
• Termination for Default
• Contract "Default" clauses
• Bases for termination
• The termination decision
• Contractor defenses
• Government remedies
• Contesting default terminations
• Determining fair prices for negotiated contracts: TINA
• Disclosing commercial sales practices for GSA MAS contracts
• Reporting price reductions for GSA MAS contracts
• Determining the contract value
• Audits of contractor records: types and scope
• Foreign ownership, control, influence
• Anti-assignment and novation
• Protecting intellectual property
• Post-acceptance liabilities
• Disputes process
• Transactions Involving Foreign Purchasers: Exon-Florio
• Background and basics
• Acquisition
• Foreign person
• Foreign control/foreign government control
• U.S. person
• Credible evidence
• Standards for intervention
• The review process
• Informal consultation
• Notice of transactions
• Third parties
• Agency notices
• Potential for disclosure
• Timetable
• Transactions Involving Foreign Purchasers: FOCI Restrictions
• The basics
• DoD Industrial Security Program
• Facility Security Clearance ("FCL")
• The determination of FOCI
• Methods of negating FOCI
• DOE determinations
• DOE rules
• Contract terms and flow-downs
• Determining eligibility for FCLs or contracts
• Negating methods

Summary and Review: A Due Diligence Methodology in Government Contractor Mergers & Acquisitions

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