Overview: SBA New Rules
After the typical protracted process of rulemaking, the SBA issued a final rule on December 17, 2024 that went into effect January 16, 2025. Most of what went into effect was fairly benign and formalized what was accepted practice through court decisions and accepted practices. This included:
Minority Controls – When a large business makes a minority investment in a small business contractor, there are some minority shareholder rights that allow the minority shareholder to block extraordinary actions by the small business without triggering affiliation rules. These rights were previously defined in the rule for veteran-owned small business and SDVOSBs and were added to all general affiliation rules as well as 8(a) and WOSBs. These controls are important for lawyers when crafting Stock Purchase Agreements (SPAs) and Operating Agreements for any minority investment by a large business in a small business to ensure the small business does not forfeit its small business status.
Recertification – as before this rule, post-transaction, a recertification of size and status is required by a buyer and a seller within 30 days of a change of control transaction. However, this is where the big impact is when an existing small business is Other Than Small post-transaction:
While there are some additional changes, the impact on eligibility of multiple-award contracts, post-transaction, where the contractor is no longer small is a major impact. Small Business contractors, considering a transaction, need to take stock of their options for a transaction. This rule also has a carve-out if a small business acquires a small business and the new entity is no longer small. They can still continue to execute multiple-award contracts. However, from an M&A perspective, the vast majority of these transactions involve a large business acquiring a small business. Most small businesses lack the financial resources to execute acquisitions of other firms. It will be interesting to see how many small business owners push their M&A plans forward into 2025 to gain value for their multiple award contracts.
If you have any questions or would like to share your thoughts on this topic, feel free to connect with me.
Mr. Calogero has deep experience in Supply Chain and Manufacturing Industries. Prior to FOCUS, he was the Vice President of Operations for McElroy Manufacturing, Inc., an OEM with revenues of $100M and 250 people. Under his leadership, he leveraged Lean Manufacturing and Advanced Manufacturing technologies to transform the operations of the company. He drove an increase of Gross Margin by 700 basis points, while improving On-Time Performance from 62% to 92%, reduced turnover by 60%, with world-class safety and quality.
As the COO of Coastal Sunbelt Produce, he was responsible for operations, supply chain management, street sales, and asset velocity for this Private Equity backed $300M, 500-person Food Manufacturing and Distribution firm, delivering a 100-basis point increase to EBITDA in the first year. He has also worked in the Aerospace sector, launching his career at Lockheed Martin and Boeing in Finance and oversaw $3B in helicopter and weapons systems contracts. He also led a consulting business in Michigan that transformed product development for Ford, General Motors, and several Tier 1 & 2 Automotive suppliers.
He also worked extensively in Management Consulting and Government Information Technology. He helped transform over 200 companies in Manufacturing, Distribution, Hospitality, Technology, Semiconductor, Life Sciences, and Hospitals/Healthcare. He founded a management consultancy, XSell Solutions, improving performance in Sales, Supply Chain, and Production. He also served as the President of Tefen USA. For this 100 person Global Management Strategy and Operations Consulting firm, he directed all activities within North America and the Far East. Customers included Schneider Electric, Massachusetts General Hospital, Baxter Healthcare, Abbott Laboratories, Applied Materials, Amgen, and Pfizer.
His career in Government IT included Senior VP of Sales and Strategy at Robbins-Gioia, a 600-person program management and business process outsourcing firm, with clients across the DOD and Federal Civilian Agencies. He also served as the Business Manager for Computer Sciences Corporation, leading systems integration programs for the Department of Interior and Department of Commerce.
With an MBA from The George Washington University and a BA from Loyola University Maryland, he is an accomplished presenter, including keynote presentations in Healthcare and National Manufacturing Week conferences, to name a few. Mr. Calogero is a Member of the Young Presidents’ Organization Gold Washington DC/Baltimore Chapter and past Chairman of the YPO DC/Baltimore Chapter.
Mr. Calogero holds FINRA Series 63 and Series 82 licenses.
