Aerospace, Defense & Government Services: Business Valuation & Sale Guide

How Aerospace, Defense & Government Services Companies Are Valued

Smaller government contractors are typically assessed on SDE, while businesses with program-management and compliance infrastructure are more naturally evaluated on normalized EBITDA. A buyer reviews contract type (cost-plus, fixed-price, or time-and-materials), backlog and contract-vehicle visibility, DCAA-compliant accounting systems, and the depth and transferability of security clearances.

OwnerGauge applies a provisional aerospace-defense-government-specific multiple range to the assessment, based on its own analysis of public 2025-2026 market research — multi-year budget visibility and security-clearance moats support a premium and strong buyer demand relative to commercial contracting.

Revenue Quality in Aerospace, Defense & Government Services

• —Multi-year contract vehicles (IDIQs, GSA schedules) with defined task-order flow are worth more than single-award, short-duration contracts.
• —Cost-plus contracts provide margin visibility but come with compliance overhead; fixed-price contracts carry more execution risk but reward efficient delivery.
• —Revenue concentrated in a single agency or program is a real risk buyers price in, regardless of how strong the underlying relationship is.

Owner Dependency

• —The owner is often the facility security officer, program manager of record, or the person with the deepest agency relationships.
• —A buyer tests whether cleared program management and agency relationships extend beyond the owner, and whether the facility clearance can transfer or be re-established.

Management & Workforce

• —Cleared personnel are scarce and slow to replace — building a cleared workforce typically takes well over a year — which makes staffing continuity a real diligence focus.
• —Buyers look for documented program-management depth, a clean DCAA audit history, and compliance staff beyond the owner.

What Can Make the Business More Attractive

• —Diversify agency and program concentration where it's high
• —Maintain and document a clean DCAA compliance and audit history
• —Build cleared program-management depth beyond the owner
• —Pursue additional contract vehicles to reduce single-award dependency

What Can Influence Valuation

• —Contract type and backlog visibility (cost-plus, FFP, T&M, IDIQ)
• —DCAA-compliant accounting systems and audit history
• —Security clearance depth — facility clearance and cleared personnel count
• —Prime versus subcontractor position and novation risk on ownership change
• —Customer/agency concentration and contract-vehicle expiration timing

What Buyers May Evaluate

• —DCAA audit findings and accounting-system compliance
• —Security clearance transferability and cleared-workforce depth
• —Agency and program concentration and contract-vehicle expiration timing
• —Novation and change-of-control provisions in existing contracts

Common Transaction Risks

• —A single agency or program contract represents an outsized share of revenue
• —DCAA audit findings or accounting-system deficiencies are unresolved
• —Facility clearance or cleared-personnel depth is thin and hard to replace
• —Contract novation on change of ownership is uncertain or unfavorable

Preparing the Company for Sale

• —Resolve any open DCAA audit findings before going to market
• —Document contract-vehicle backlog, expiration timing, and novation provisions
• —Build cleared program-management depth beyond the owner
• —Diversify agency and program concentration where feasible

Related reading

The value drivers above are covered in more depth here.

• Owner Dependency: Why It's the Single Biggest Lever on Your Valuation
• Customer Concentration: Why Buyers Draw the Line Around 20%
• Recurring Revenue: Why Buyers Pay More for Revenue That Doesn't Have to Be Re-Earned
• SDE vs. EBITDA: Which One Actually Matters for Your Business?
• How EBITDA Multiples Actually Work
• What Happens During Due Diligence When You Sell a Business?

How the Sale Process Works

Every sale moves through the same general stages — preparation, valuation, positioning, marketing, buyer outreach, indications of interest, a letter of intent, due diligence, definitive documentation, and closing.

Frequently Asked Questions