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ExecutiveBiz: Why did you start your company?
Bob Kipps:
First let me begin by saying we established our company on May 1 of this year. I am pleased to announce that on Monday, June 25, we will officially launch our company with a new website (www.kippsdesanto.com) and press announcement to the greater Northern Virginia and Washington markets. Why did we start the business? There were multiple factors. The most important of which was that my business partner, Kevin DeSanto, and I saw a huge opportunity to create a world class, industry-focused, investment bank here in the Washington area. We saw our substantial transaction experiences, client-first model and open architecture approach – real differentiators in this marketplace – as too compelling an opportunity not to pursue. Secondly, we had substantial pent-up entrepreneurial energy. Almost all of our clients have been and continue to be entrepreneurs. The most gratifying part of our job is helping great people achieve optimal transaction results in return for all of the proverbial blood, sweat and tears (not to mention risk) they have invested in their businesses.
ExecutiveBiz: What is your company's focus and niche?
Bob Kipps:
We are sticking to what we know – from a size, industry sector and geography perspective – meaning that we’ll be focusing on being the trusted financial advisor and investment banker to the leading firms in the Government Contracting and Commercial Technology industries, both regionally and nationally. Put another way, we are offering M&A, private financing and strategic advisory services to middle market, growth-oriented firms in the industries we know.
ExecutiveBiz: What is your business strategy and plan to compete against the larger players in the market?
Bob Kipps:
Unlike IPOs or other areas where capital and breadth of firm matter, firm size is not typically a factor in clients’ decision on who to engage for the M&A and other strategic advisory services we provide. As I mentioned, our clients fully understand where we are and the benefits of working with a smaller, more nimble firm given their own business backgrounds. In our business, clients tend to select the best team of people that they feel will provide the best service and, more importantly, deliver the best results.
Given the consolidation, business difficulties or inherent conflicts created by the business models of many of our competitors, we see the marketplace as wide-open for an experienced provider of unbiased investment banking services and strategic advice. Our business strategy is based on having the absolute best bankers on our team and we are off to a great start. Our plan from here includes recruiting the best talent available, extensive training and otherwise creating a unique and rewarding culture (including employee ownership). We’ve found that the recent investment banking consolidation (another deal was announced on Monday) has increased the availability of talented bankers who value our principles, culture and upside. Thus, we have aggressive growth plans—aiming at building a 50-plus person firm over the next 5 years.
ExecutiveBiz: For your government contractor clients, what is your view of the upcoming SBA rule change on June 30th regarding re-certification?
Bob Kipps:
Near term, we expect the uncertainty associated with how the ruling will be implemented to create a period of time (perhaps the balance of this year) where companies with material small business set-aside contracts will be viewed more cautiously. More importantly, the ruling draws acute attention to the risks which have always existed with smaller firms. I’d expect the ruling, like other structural changes occurring in the market related to Organizational Conflicts of Interest and changes in the political environment, to further segregate the market and respective valuations.
ExecutiveBiz: Are valuations staying constant, going up or down?
Bob Kipps:
Across the board—meaning all industries—valuations are going up as the equity markets continue to rise and the credit markets, which are fueling the LBO boom, continue to stay at all time highs. Within the Defense, Intelligence and Government contracting sectors, we see M&A valuations getting more dispersed but continuing to stay at elevated levels given the diverse buyer universe and strategic buyers needing to continue to find organic growth catalysts.
ExecutiveBiz: What advice would you give to a founder looking for an equity event/exit strategy this year?
Bob Kipps:
Leverage the advice of your corporate and personal advisors (lawyers, accountants, lenders, investment bankers, wealth managers and tax/estate planners) to help you prepare. Pursuing and consummating a transaction is a complex and high anxiety event—planning and preparation both on the company and individual shareholder level will make the road much smoother and more likely fruitful.
For government contractors with set-aside contract dependency, I’d suggest using the next 6-18 months to plan and prepare (versus trying to execute a transaction) and to see how the dust settles. For mid-size firms in the Intel, Health or Security markets or without meaningful small business risk, now is a great time to be considering an exit. The valuation engine is hitting on all cylinders. The short supply of quality firms creates acute scarcity value and the political and PR storm clouds over the industry have not yet dampened buyer appetite or aggressiveness.
ExecutiveBiz: What is your view of the role of private equity in the federal contracting space?
Bob Kipps:
Given the grand slam successes experienced by Anteon, Veridian, Apogen, SI International and several others, private equity interest in the sector has increased and the benefits of such deals are also becoming better understood by owners of mid-size companies. It doesn’t hurt that the credit markets and supply of private equity have narrowed the strategic vs. private equity valuation gap. Given the growing demands, increasing risk and inflexibility of public buyers, private equity will continue to play a larger role in M&A across most industry sectors. Within the federal market, we see the growth and risk threshold for selling to a public buyer as continuing to get more stringent. For those few companies that meet the strict criteria, go the spoils of premium valuations and terms. For the balance, private equity buyers are a fantastic alternative to still achieve liquidity at a fair valuation and perhaps have the opportunity to co-invest in an exciting and financially rewarding growth platform.
ExecutiveBiz: What is something most people don't know about you?
Bob Kipps:
Being born in the District and growing up in Arlington, I am one of the few true Washington natives still around this area. Combined with my father being a leading government contracts lawyer, I’ve been surrounded by technology and government contracting most of my life. I am also happily married and the father of three young children which has among other things honed my multi-tasking skills created a wonderful work/personal life balance that is a key principle we are instilling in our new firm.
ExecutiveBiz: What is your favorite business book and why?
Bob Kipps:
Jack Welch’s “Jack: Straight From the Gut” is a book that I found both enjoyable and professionally valuable. His emphasis on performance, developing people (training, incentives and rewards) and his never ending commitment to perfection (six sigma, etc) are all fundamental to our team as we begin building a world class professional services organization.
If you want contact Bob, please email him at bkipps@kippsdesanto.com
For more information about
KippsDeSanto & Co, visit
www.kippsdesanto.com.
Interview with Bob Kipps conducted by JD Kathuria.
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