Chances are the defense sector doesn’t immediately come to mind when you think of US industries coping with the impact of globalization. Yet, last year saw an unusually high number of foreign acquisitions in this area. The British are leading the charge, accounting for 20 of the 23 cross-border acquisitions of US defense firms, with French and Italian firms beginning to mobilize as well. And the value of acquisitions announced in the first six months of this year exceeds that of the last three years combined due to the largest foreign acquisition of a US defense contractor ever: BAE Systems $4.2 billion acquisition of United Defense Industries.
We believe four factors explain much of this activity:
- Diverging national defense budgets within NATO
- Political and economic barriers to further consolidation of the European defense industry
- Changes in the US business model
- Increased US acceptance of overseas (particularly British) defense firms
The declining value of the US dollar against the U.K. sterling offers a further incentive to U.K. buyers looking for bargains in the US
In this issue, Simon Lamb, director, and Jeremy Kahan, associate, in the Transaction Services Strategy Group explore the dynamics behind breaking into the US market and how US and foreign defense companies can benefit from this trend.
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