Why 2025 is the Best Year for Selling SBA-Designated IT Businesses

The recent release of the Small Business Association (SBA)'s final rule governing small business contracting has created a unique and lucrative selling opportunity for owners of HUBZone, WOSB, EDWOSB, and SDVOSB IT businesses. 

This rule introduces significant changes in the government contracting landscape, particularly around mergers and acquisitions. One of the most impactful changes in the SBA rule is the delay in the implementation of a key provision: ineligibility for set-aside task orders and options under Multiple Award Indefinite-Delivery Indefinite-Quantity (MAC IDIQ) contracts after being acquired by a large business.

This provision will come into effect on January 17, 2026. 

Why 2025 is the Best Year to Sell Your SBA-Designated IT Business:

This delay creates a unique window of opportunity for both sellers and buyers in the government IT contracting space. For sellers, 2025 presents a compelling case for exiting the government IT contracting market:

• Maximize Value Before the Rule Takes Effect: Until January 17, 2026, your existing MAC IDIQ contracts retain maximum value for large business acquirers. After this date, their value could diminish significantly, as they will no longer be eligible for set-aside task orders and options. Selling this year allows you to capitalize on the current market conditions where your contracts hold the highest value. This is a significant factor for buyers as well, as they can acquire a stream of revenue and future opportunities that will be restricted after the rule change. 

• Avoid Future Uncertainties: The new SBA rule introduces complexities and uncertainties in small business mergers and acquisitions that could make it challenging to predict future contract eligibility and revenue streams. For example, the rule introduces strict affiliation rules, potentially impacting a company's ability to maintain its small business status. Selling now allows you to exit the market with certainty and secure a clean break before these uncertainties materialize and potentially impact your business's future performance and profitability. 

• Cash Out and Plan Your Future: Selling your business provides you the opportunity to cash out on your investment, diversify your portfolio, or pursue other passions. This provides financial security and flexibility for business owners who have dedicated years to building their companies. 

Strategic Considerations for Sellers:

• Timing is Crucial: The window for maximizing value is limited. Let’s talk about potential buyers ensuring a smooth and timely 2025 transaction. Proactive planning and early engagement allows you to maximize your leverage and secure the best possible deal.

• Leverage Current Market Conditions: The current market for SBA-designated IT businesses is favorable. Utilize this window to secure a premium valuation for your company. Highlight the value of your existing contracts and the strong pipeline of future opportunities to attract interested buyers.

• Understand the Rule Changes: It's essential to fully understand the implications of the new SBA rule on your business and the M&A process. Seek guidance from legal and financial professionals experienced in government contracting. They can help you navigate the complexities of the rule and advise you on the best course of action. 

Strategic Considerations for Buyers:

• Early Acquisition Advantage: Large businesses can gain a significant competitive advantage by acquiring SBA-designated IT businesses before January 17, 2026. This allows them to leverage existing contracts and continue bidding on set-aside task orders, providing a valuable stream of revenue and future growth opportunities. 

• Small-to-Small Acquisitions: The rule incentivizes small-to-small business acquisitions, creating opportunities for growth and expansion within the small business ecosystem. This strategy allows small businesses to maintain their eligibility for set-aside contracts while expanding their capabilities and market share.

• Risk Mitigation: While the delay in the rule's implementation provides a window of opportunity, it's crucial for buyers to conduct thorough due diligence and assess the potential long-term impact of the rule changes on the acquired company.

Summary

The SBA's new rule on small business contracting presents a unique and time-sensitive opportunity for owners of SBA-designated HUBZone, WOSB, EDWOSB, and SDVOSB IT businessess to maximize their return on investment. By carefully considering the implications of the rule and taking decisive action, sellers can ensure a successful and profitable exit strategy.

For buyers, 2025 presents a prime opportunity to acquire valuable assets and expand their market share within the government contracting space.

Are you ready to sell your SBA-designated IT business? Contact us today to learn how we can help you maximize your valuation before the SBA rule changes take effect.