Defense Consolidation: Who Gets Bought First? (From Forbes)

If the current downturn in demand for military goods and services persists, then the defense industry will have to consolidate into a smaller number of players. Policymakers have told the six big firms that comprise the sector’s top tier that they cannot buy each other because that would reduce competition too much, and none of them is eager to buy deeper into low-margin services work. That means that if and when sector consolidation ramps up, most of the action will be in smaller equipment makers. The most compelling target for a near-term acquisition is Exelis, a $5 billion spinoff from the old ITT that has an impressive array of technology franchises and competencies, but a market cap of only $2.5 billion — making it an eminently manageable deal for any first-tier player in the sector. I have written a commentary for Forbes here.