Government Services Update H1 2025

Market Commentary

• Government Technology Services M&A Deal Volume was down 38.8% in the 1^st Half of 2025 v. 2024, from 98 deals down to 60 as the change of administration, DOGE impact, budget cuts, procurement delays/uncertainty, along with agency cutbacks and shutdowns have created significant uncertainty in the market. 
• Despite this, Strategic M&A activity remained consistent with 27 deals in the 1^st Half of 2025 v. 29 deals for the same time last year. PE exits were minimal with only 7 exits, two of which involved the combination of existing platforms.
• New PE Platform formation was considerably down as well with only 10 new platforms in the 1^st Half v. 27 in 2024 while Bolt-Ons were also down (23 v. 42 the year prior). However, the number of Govt Services PE-backed platforms has increased to 146.
• M&A activity in the 2^nd Half of 2025 is expected to pick up as agency, program and budget priorities become clearer and changes become more engrained into the acquisition and procurement infrastructure. PE firms with extensive Government Contracting expertise are expected to lean further and remain active in the market in focused areas but market uncertainty so far this year could cause newer entrants to wait and see.
• Given the increased scale, impact and pace of both global conflicts and threat vectors (kinetic and non-kinetic), the complexity and speed to market of Govt IT solutions, along with broader A&D platforms, will remain critical and drive further M&A volume for the balance of 2025 and into 2026. 
• So far in 2025 there continues to be various exit scenarios for sellers, such as:
  • Public Strategic: Parsons (TRS Group), Leidos (Kudu Dynamics), Serco (Mission Training and Satellite Ground Network Communications Software Business of Northrop)
  • New PE Platforms: Arlington (GRVTY), Falfurrias Capital (Oddball), McNally Capital (Quiet Professionals)
  • Fund-to-Fund: Intellibridge (Enlightenment) to Agile Defense (Enlightenment), cBEYONData (Bluestone) to SMX (Oceansound), System High (Enlightenment) to Ridgeline (Enlightenment)
  • Bolt-Ons:
    • VTG (A&M Capital) acquires Loki Solutions, Byte Systems, iotaIT, and Tunuva
    • Xpect Solutions (NewSpring) acquires GovDefender
    • Crimson Phoenix (Godspeed) acquires Blackspoke
    • SPA (Arlington Capital) acquires Proximity and Intrepid
    • Harmonia (MDP) acquires Maveris

We hope you find this information valuable, and, as always, feel free to reach out if you would like to discuss in further detail.

Sincerely,