The proposed merger between L3Harris and Aerojet Rocketdyne has attracted significant opposition from some US Senators, some of whom have written to the Federal Trade Commission (FTC) to urge them to block the deal under anti-trust rules. This comes on the heels of Lockheed Martin’s abandoned attempt to purchase Aerojet Rocketdyne after opposition from the FTC. Ongoing scrutiny of defense industry consolidation has seen the number of defense primes in the US fall from 51 in the 1990s to just five in 2023 (Lockheed Martin, Northrop Grumman, Boeing, Raytheon and General Dynamics). The last major deal to be approved by the FTC was Northrop Grumman’s acquisition of Orbital ATK, and even this agreement has come under scrutiny by the FTC in recent years due to its lack of compliance with anti-competition rules, likely related to supplying solid-state rocket motors to competitors.

The US defense industry is almost totally controlled by five major companies is increasingly a point of regulatory and political contention, with a Pentagon report from 2022 stating that increased consolidation was effectively reducing industrial capability and capacity. The purchase of Aerojet by any company is controversial in part due to numerous primes are dependent on their products, in particular solid-state rocket motors.

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The conflict in Ukraine has increased pressure on the US supply chain, and increased attention on the lack of suppliers and difficulties in ramping up production as needed in times of crisis. Problems in ramping up supply of critical products, including missiles (of which 90% are supplied by three companies), has created increased scrutiny in the US with analysis that if there were two simultaneous major conflicts there could be very real problems supplying enough equipment for both fronts. Equipment that has been essential to Ukrainian war efforts such as HIMARS, Javelin, and HARM missiles are produced by primes (Lockheed Martin and Raytheon in this case) who are often not equipped to rapidly ramp up production, and the US continues to be concerned that lack of production capacity amongst key suppliers is a problem being exacerbated by industry consolidation and resultant lack of competition.

Opposition to these M&A deals will potentially prevent further consolidation, and may increase efforts to enforce anti-trust laws while encouraging new market entrants. Efforts to force suppliers to equitably work with rivals have been mixed, and strengthening the defense industrial base will require new market participants and increased oversight of mergers. Concerns about supply chain resiliency, which have been heightened since the invasion of Ukraine, will be a problem for defense primes seeking to make acquisitions, and will cause issues for L3Harris as it seeks to acquire Aerojet Rocketdyne.

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