For the most part, the race to be the primary defense contractor supplying military technology to the United States government is controlled by five mega-corporations. Lockheed Martin, Boeing, Raytheon, Northrop Grumman and General Dynamics are the industry leaders, standing head and shoulders above the rest. Those five are likely to keep going strong for a long time, but we may soon see a sixth competitor enter the market: According to the Washington Post, a merger between L3 Technologies and Harris Corporation will soon create a $33.5 billion military technology giant.
The combined company, called L3 Harris Technologies, will be based in Melbourne, Fla., which Harris already calls home. It will create a new 12-member board of directors, taking six stakeholders from each company. The military technology superteam may well create a sixth government contracting power. The current top five each take in more than $10 billion a year from the federal government, while L3 and Harris made a combined $8.3 billion last year. Chris Kubasik, chief executive of L3, is optimistic that this new deal gives his company the momentum to keep growing.
“L3 Harris Technologies will possess a wealth of technologies and a talented and engaged workforce,” Kubasik said. “By unleashing this potential, we will strengthen our core franchises, expand into new and adjacent markets and enhance our global presence.”
This new merger is just the latest example of a great deal of activity we’ve seen among government contractors in the last two years. A new federal defense budget under President Trump facilitated a significant jump in military technology spending, and companies have done everything they can to capitalize. Last year, Northrop Grumman bought aerospace contractor Orbital ATK for $7.8 billion; United Technologies Corporation also purchased aircraft parts manufacturer Rockwell Collins for $30 billion.
Zoom out, and you may see a large-scale development that’s overtaking the defense technology industry: the disappearance of the middle class. The huge corporations dominate the market for military contracts, and the middle-tier contractors are finding that the best way to stay competitive is to join forces, thus becoming mega-corporations themselves. That’s certainly what L3 and Harris are angling for.
“This merger creates greater benefits and growth opportunities than either company could have achieved alone,” Kubasik said.
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