The Next Round of Consolidation

With or without sequestration, the defense market in the United States—as in many parts of the world—is shrinking. So does that herald a new round of defense industry consolidation? Not necessarily, said Chris Kubasik, Lockheed Martin’s president and COO, and its chairman-elect. Speaking with the Daily Report after a company press conference in Arlington, Va., on June 19, Kubasik said the Pentagon wants to preserve competition as much as possible, and that means federal regulators “probably wouldn’t want to go below the ‘big five'” companies supplying the Defense Department (Boeing, General Dynamics, Lockheed Martin, Northrop Grumman, and Raytheon). Similarly, regulators probably wouldn’t allow two of the majors to join up, creating a behemoth no one else could match, he said. However, “if an equity firm wanted to buy one and break it up,” selling pieces to each of the others, regulators “might be willing to go along with that,” said Kubasik.