04 August 2023

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How will new antitrust policy affect military contracting? The strongest effect could be on startups, whose liquidity horizons could greatly lengthen. Just this month, new merger guidelines emerged from the Justice Department and the Federal Trade Commission, and to some alarm. As Elizabeth Nolan Brown wrote for Reason magazine immediately thereafter, the hint therein seemed to be “Maybe Just Don't Merge Anything at All.” In thinking about how this new articulation of old-is-new-again policy might affect investors and industrialists in military contracting, I have formulated four points: The new merger guidelines seem severe, but may not greatly matter with large contractors. Horizontal mergers amongst large military contractors have been effectively forbidden for at least a decade, even if, as I will note below, they may not be so pernicious in those markets. Vertical mergers have come under serious scrutiny, which is why Lockheed Martin’s attempted purchase of engine supplier Aerojet Rocketdyne was disallowed. Conglomerate mergers have merely been attracting concern, which is why the entirely unrelated firm L3Harris was allowed to buy Aerojet Rocketdyne. The new guidelines do not say too much about conglomerate mergers, so the overall effect may be muted. High-quality startups need prices and pathways—including options for merger. The problem may lie with startups, if enthusiasm for antitrust enforcement turns in that direction. Startups in any industry have...

James Hasik

Political economist of innovation, industry, and international security

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