Mergers, Acquisitions, and Strategic Transactions
Mergers, acquisitions, and other strategic business transactions are utilized by companies to provide greater value to customers, adjust to marketplace conditions, and provide greater returns to shareholders and investors. Several high profile defense industry mergers and acquisitions (M&A) in recent years have brought heightened attention to the topic. In 2015 Harris acquired Exelis, and Lockheed Martin purchased Sikorsky from United Technologies Corporation. In 2016, Lockheed Martin separated from its Information System and Global Solutions business segment, which then merged with Leidos Holdings. While defense industry M&A activity generally holds a negative connotation due to heavy industry consolidation following the end of the Cold War to absorb pending budget cuts, recent M&A activity has been driven by defense marketplace and a desire to better serve government customers.
Some in the Defense Department were concerned by recent M&A activity, however, safeguards remain in place to ensure no proposed merger or acquisition undermines national security or competition in the defense sector. More concerning should be other recent transactions, such as iRobot’s sale of its defense and security business and Computer Sciences Corporation’s split of its federal and commercial businesses, which reflect the how lucrative the Department’s business is to innovative firms, and the burdens of doing business with the Department, respectively. Going forward, the Department of Defense (DoD) should understand that M&A and other strategic transactions are driven by the marketplace, in the form of DoD’s buying practices and programmatic decisions, and adjust its behaviors accordingly to incentivize its desired industrial base.