WASHINGTON — American radio-maker Harris completed its acquisition of Exelis last week, well before most analysts' best-case-scenario projections when the merger was announced Feb. 6.
Harris chairman, president and CEO William Brown said the company was confident at the outset that the acquisition would be completed in a smooth and timely manner.
"We started with a solid strategy, experienced team and tremendous clarity regarding what needed to be accomplished to be successful," Brown said. "I believe the approval process went smoothly due to our market reputation for solid program execution, our customers' appreciation for the power of this highly complementary and strategic combination, as well as our prompt responsiveness to any issues that were raised along the way."
"With about $8 billion in combined pro forma revenue, the acquisition creates significantly greater scale, bringing together two engineering-driven companies and work forces with similar cultures that value technology leadership. Together, the two companies' complementary technologies and capabilities strengthen core franchises and provide new opportunities for innovation to solve our customers' most complex challenges."
"There were no show-stoppers in the government's merger review that I could see," said Steven Grundman, a former Pentagon industrial policy chief and now the principal of Grundman Advisors.
"As similar-looking as these companies may have been, their offerings and capabilities are more complementary than overlapping."
Harris did not have to put any mitigation plans into effect to satisfy regulators, Burke said, and during the government's review, no conflicts of interest were identified "that required us to take any actions."
Mark Nackman, a lawyer specializing in government contracts who has worked in the defense industry and has no firsthand knowledge of the Harris-Exelis transaction, said the deal would not have proceeded as smoothly as it did if there had been pushback from the Department of Defense or from other defense contractors.
"For this industry to remain viable, the government is going to have to tolerate some contraction and consolidation if budgets are going to continue to move in the direction that they are," he said. "This is the market force that has to take place."
With the addition of Exelis, Harris will be an even bigger player in the radio market, but not to the point where it will enjoy an unfair advantage over its competitors, he said.
"At the end of the day, the regulators felt comfortable that there would be adequate competition in the marketplace," Nackman said.
Harris will benefit from incorporating experienced engineers and project managers from Exelis, but it is difficult to quantify how much value these additions will generate, Grundman said.
"Particularly at this advanced stage in the downturn of defense spending, there's not a lot of headcount slack in defense companies," he said. "Together, they now really do have a full scope of C4ISR capabilities. Independently, each had some holes in its respective ability to address C4ISR opportunities. Having said that, it's maddeningly hard to know the value of such economies of scope, though I'm certain there is some."