Timing the Sale of Business
The SBA Office of Hearings and Appeals (“OHA”) issued a decision earlier this year that illustrates considerations for timing the sale of a business. SIZE APPEAL OF: TESCOM, SBA No. SIZ-5641 (2015) The chronology is interesting:
- In March 2014, the apparent successful bidder, Guisys, submitted an offer.
- In April 2014, Guisys initiated discussion with a potential buyer for the company, Greenlee.
- In August 2014, Greenlee acquired Guisys.
- December 16, 2014, the CO announced that Guisys was the successful offerer.
- The next day, on December 17, 2014, Tescom filed a size protest with SBA, alleging that Guisys was not a small business because Greenlee, a division of Textron, a large business, had acquired Guisys.
In general, employees and revenue of businesses are combined with affiliates for purposes of size determination. Additionally, agreements to merge, even in principle, provide a company with power of control sufficient to find affiliation. However, an agreement to discuss a possible merger or sale of stock is not an agreement in principle and does not affect control of a concern over another.
Here the date for the size determination was March 10, 2014 – the date of initial offers. Because acquisition discussions did not commence until April, OHA found that Guisys was not affiliated with Greenlee.
Additionally, OHA noted that although a concern must recertify its size to the procuring agency after a merger or acquisition pursuant to 13 C.F.R. § 121.404(g)(2), after such a notice “the Navy can no longer count options or orders issued under this contract toward its small business goals,” but that a “concern that qualifies as small at the time it receives a contract is small for the life of the contract.” (citing The W.I.N.N. Group, Inc., SBA No. SIZ5360 (2012).
If handled properly these regulations allow a small business to capitalize on a prospective contract award if it times the negotiations and sale of its business judicially.
