5
2013 Year in Review
Federal Budget Uncertainty
Federal budget uncertainty once again shaped most of the year’s discussions and industry strategies. The year began with legislation that
averted widespread tax increases and deep spending cuts, which quickly came to be known as the Fiscal Cliff. Federal agencies,
contractors, and employees endured unparalleled budget uncertainty throughout the year, which caused widespread delays and
cutbacks.
Sequestration cuts took effect on March 1 and shortly after, on March 21, Congress agreed to a Continuing Resolution (CR) to fund
federal agencies through September 30, 2013. The CR maintained sequestration but avoided an April government shutdown, provided
improved visibility, and accelerated contracting activity. However, this 6 month stopgap measure also set the stage for a 16 day
government shutdown in October.
On October 1, the federal government implemented its first shutdown in 17 years due to Congress’ inability to agree on a CR.
Approximately 850,000 federal civilian employees were placed on unpaid leave (although federal employees were eventually provided
back pay). The primary source of dispute within Congress was the 2010 Affordable Care Act, also referred to as Obamacare. House
Republicans insisted on including language to defund or weaken the Affordable Care Act only to have the measure rejected by the
Democratic-led Senate. Ultimately, Republicans backed down on their demands and agreed on a bill to reopen federal agencies and
suspend the debt ceiling. The year ended on a high note when bipartisan budget negotiators announced a deal to set spending levels for
the federal government for two years.
Budgetary uncertainty and contracting delays undoubtedly affected corporate strategies and M&A volume and valuations. A clearer
picture of long-term US federal spending will emerge in 2014-15, which should draw buyers and sellers from the sidelines. However, deal
volume and growth in the broader economy could be restrained by debt ceiling confrontations and uncertainty surrounding health care
costs. Overall, 2014 is poised to be a stronger year for M&A, but significant potential headwinds remain.
Source: Public Filings
I
Sept 2012
I
Dec 2012
I
Mar 2013
I
June 2013
I
Sept 2013
I
Dec 2013
CR passed to fund
Government from
10/1/13 – 3/27/13
Debt ceiling
suspended
until 5/18/13
Sequestration
takes effect
Bill passed to
fund Government
through 9/30/13
Shutdown begins,
congress battles over
CR and Obamacare
Shutdown ends,
funding in
place to 1/15/14
Two year
budget
deal passed
16 Days
Fiscal
cliff
averted
Federal Budget Timeline
