Defense & Government Services 2012 Year in Review
Monday, January 28, 2013 at 05:16 The McLean Group has published an overview of M&A trends in 2012 for Defense & Government Services, including representative transactions, index performance, and some general industry news.
McLean's Mitchel Martin was also quoted in a Nov-2012 article in the Washington Post talking about the pressure on the Governemnt Services sector and the need to be "very selective" on what to bid in an environment of low-price-technically-acceptable.
“...more companies going after smaller opportunities and lower-level work. You’re competing with Lockheed Martin now where you didn’t have to before.”
Of course, this highlights a central issue discussed here on Defense Ventures, of how defense contractors will remain competitive under price pressure and in (mostly) unfamiliar commercial markets. ManTech CFO Kevin Phillips says, "...we've done this before" and that they know "when and where to diversify," implying this is a regular cycle in the defense industry.
That may be true. Low-price acquisition in DoD seem to come and go, usually ushered out by the creep of poor quality and inevitable, expensive contract failures that LPTA tends to engender. Eventually the Lockheeds flush out the little guys through a combination of cash, patience, and aggressive lobbying.
However, a most dangerous trend for the biggest industry players would be a convergence of low price with increased commercialization. That is, what if the wars of the future don't need the defense industry (as much)?
What if, more likely, adjacent commercial markets in security, networked communications, public services, healthcare, big data.... don't turn out to be fertile growth grounds for top-heavy, monolithic corporations better suited to big weapons programs and 10-year backlogs?
What if the Government figures this out?








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