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Carter: DoD Open to Small Defense Mergers

Undersecretary of Defense for Acquisition, Technology and Logistics Ashton Carter, Photo: defense.gov

The Defense Department realizes defense company mergers are a reality in an era of tight budgets, the Pentagon’s procurement chief said in a Wall Street address yesterday.

In fact, DoD is even open to such mergers and acquisitions.

But, in return, the Pentagon expects companies to operate more transparently and be forthcoming about such transactions, Reuters reported.

But, the buck (or the “regulatory smiles,” as Colin Clark of DoD Buzz put it) stops with the government-contracting giants.

“The department is not likely to support further consolidation of our principal weapons systems prime contractors,” said Undersecretary of Defense for Acquisition, Technology and Logistics Ashton Carter at the Cowen Group-hosted event in New York City.

“So, even if Boeing and Lockheed might want to merge, America is unlikely to see the Pentagon approve of such a move,” Clark at DoDBuzz wrote. “Where we are likely to see approvals is among small– and medium-sized service companies.”

Carter referred to previous DoD pronouncements on mergers and acquisitions, including Clinton administration Defense Secretary Les Aspin’s famous “Last Supper” speech delivered at the end of the Cold War and the breakup of the Soviet Union. Perry’s speech ushered in an era of scaled-back spending, Reuters said, but also facilitated the M&A boom of the 1990s, which saw government-contracting giants merging to become the Pentagon’s main suppliers.

Carter said, though, comparisons to previous policies were not apt because circumstances — and the industry — have changed so much.

But what hasn’t changed is the role the defense industry plays, he suggested.

“A strong, technologically vibrant, and financially successful defense industry is … in the national interest,” he added.

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