Report on the Effects of Mergers in the Defense Industry

You are here: Homepage > Search

Report on the Effects of Mergers in the Defense Industry

Defense procurement outlays in constant dollars, i.e., adjusted for inflation. have declined 61 percent from 1987 to 1998. This decline has lowered contractor revenues and increased their excess capacity. Companies have responded to these developments in predictable ways - reducing employment, closing facilities. reengineering processes to become more efficient, developing closer relations with their suppliers, and pursuing merger and acquisition opportunities. Section 826 of the National Defense Authorization Act for Fiscal Year 1997 requires the Secretary of Defense to conduct a study on mergers and acquisitions in the defense sector. It specifies that the study shall address: the effectiveness of defense mergers and acquisitions in eliminating excess capacity within the defense industry; the degree of change in the dependence by defense contractors on defense-related Federal contracts within their overall business after mergers; the effect on defense industry employment resulting from defense mergers and acquisitions occurring during the three years preceding the date of the enactment of this Act; and the effect on competition for defense contracts.