New SBA Rule to Impact M&A for Small GovCon Firms
A new Small Business Administration rule, effective January 2026, will change how small businesses must recertify their size and status on set-aside contracts after a merger or acquisition. The change creates a key due diligence item for defense contractors looking to scale through M&A.
Previously, a large business could acquire a small contractor and continue to compete for task orders on that firm's existing set-aside Multiple Award Contracts (MACs). The SBA considered this a loophole, as larger entities could benefit from contracts intended for small businesses. The new regulation, with its key provisions taking effect on January 17, 2026, closes that gap. Now, if a merger or acquisition causes a company to recertify as "other than small," it will no longer be eligible for future task orders or options on those set-aside MACs. This change does not apply universally. For single-award set-aside contracts, an acquired firm can generally continue performance and receive orders even after a disqualifying recertification. However, the contracting agency will no longer be able to count those awards toward its small business goals. The rule requires a company to recertify its size and socioeconomic status within 30 days of any merger, sale, or acquisition that results in a change of controlling interest. This applies to both the acquiring and the acquired firms if they hold small business awards. While the major impact on MACs was delayed, the change hit contractors on GSA Federal Supply Schedule (FSS) contracts much sooner. As of January 16, 2025, a disqualifying recertification makes a vendor ineligible for future FSS orders or Blanket Purchase Agreements (BPAs) set aside for small businesses. The one-year delay for MACs has spurred a wave of M&A activity through 2025. Sellers and buyers are incentivized to close deals before the January 17, 2026 deadline, after which the value of small businesses holding significant set-aside MACs could be substantially impacted.
