While government agencies continue to operate at the established levels and tightly control the dollars they have on hand, the stock market is jumping in anticipation of the dollars that are predicted to flow into the GovCon sector as a result of the 2 year budget now being finalized and signed.
A new report released this week gives the numbers behind a year that GovCon and defense sector observers believes represents an unprecedented period of in the industry not seen since the 1990s.
Thomson Reuters and PwC have pegged the overall value of mergers and acquisitions in the aerospace and defense sector at $52 billion in the third quarter of this year alone to exceed figures in any full year since 2001.
A&D companies have altogether made 34 deals through three quarters with a total value of $64.3 billion that includes the $9 billion acquisition of Sikorsky by Lockheed Martin, which is set to close today.
A related trend the report authors highlighted is moves by prime contractors such as Lockheed and others to separate their IT and government services segments and focus on the large defense programs with higher margins.
As the primes move out, other players see opportunity in the services arena of GovCon and one of them has revealed the name and business reach it will operate under.
The combined entity of CSC’s U.S. public sector business and SRAInternational will hit Wall Street and the federal IT market Nov. 30 as its largest contractor by annual revenue under the name of “CSRA.”
We are also anticipating further news from Lockheed on the future of its government services business along with its peers BAE Systems Inc. and L-3 Communications that are looking at similar moves.
Executive Mosaic’s senior editor Ross Wilkers and Federal News Radio anchor Francis Rose took another look at GovCon’s M&A environment in an on-air discussion Thursday morning that also included a look strong earnings reports from contractors such as Harris Corp. and Huntington Ingalls plus others from October.
Click here for the full 10-minute segment that also includes a look at how the Air Force’s bomber contract award to Northrop Grumman sent that company’s stock on a surge upward.
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