Defense contractors Raytheon and United Technologies announced their intent to merge earlier this week. The deal would create the 2nd largest defense contractor in the United States. Aaron Mehta, deputy editor and senior Pentagon correspondent at Defense News, says that the consolidated company would be a new juggernaut in the government sector.
“Raytheon is largely a pure-play defense contractor. UTC has some defense stuff, they used to have more and but a couple years ago they tried to divest some of that and be more commercial. They are talking about $74 billion in projected profits next year, they’re talking about $8 billion in R&D spending,” Mehta said. “For the defense sector, it is a massive thing because Raytheon [makes] a lot of the weapons or sensors. Putting them with UTC makes them what some are referring to as a Boeing for components. It’ll be able to ride the defense sector waves but the commercial waves balance things out.”
Jerry McGinn, executive director of the Center for Government Contracting at the George Mason University School of Business, says that many agencies will examine the deal, and see if there’s enough overlap to cause antitrust concerns.
“Any merger and acquisition that is done is reviewed by the Department of Justice and the Federal Trade Commission. DoD for defense-related acquisitions will look at that. They look at it through the lens of competition,” McGinn said. “There are two aspects to that. Horizontal competition, are you in separate or overlapping markets? The other is vertical. Do you become integrated to a degree where you cannot foster competition within the marketplace? What they are going to do is look at this transaction and see where there’s potential overlap that needs to be addressed.”