Last week’s disclosure that BAE Systems and EADS are in merger discussions has predictably sparked concerns among shareholders and stakeholders. Their fears can’t be allayed until the two parties agree on all the details, but it is already clear why the companies think a combination makes sense. First, Europe is a fading factor in the global economic and military balance, meaning it must combine its best aerospace assets if it is to compete successfully with big American companies. Second, demand in the military and commercial segments of the global aerospace market tends to vary inversely — one segment strengthens as the other one weakens — so a durable enterprise must have major presence in both segments. Creating such an enterprise would help the Pentagon to hold down costs by spurring competition. I have written a commentary for Forbes here.
Find Archived Articles: