by Richard Pettibone, Forecast International.
The acquisition of Exelis by Harris is one for the record books. While not as dramatic as merger deals in the last big downturn, which saw, for example, the creation of Lockheed Martin and Northrop Grumman, the $4.75 billion transaction will instantly create one of the largest aerospace and defense firms outside of the industry primes. The combined company, with some estimated $4.6 billion in federal sales, may just crack the top 10 list of federal contractors as well.
For Exelis, the transition marks the end of its rather short corporate existence following its spin-off from ITT some four years ago. The company had been working diligently to rebalance its portfolio in light of the current downturn, spinning off its services operations into a separate company called Vectrus in 2014.What remained in Exelis was a portfolio of mission-critical, affordable, and platform-agnostic products and services for managing global threats, conflicts, and complexities. The business is focused on four strategic growth platforms: Critical Networks, ISR & Analytics, Electronic Warfare, and Aerostructures. These growth platforms, which have been strategically aligned with future customer requirements, are supported by the company’s C4ISR capabilities such as global intelligence, surveillance and reconnaissance systems; networked communications; integrated electronic warfare; and engineering and professional services.
For the most part, these operations are seen as complementary to Harris’ existing portfolio. Combined, the new Harris/Exelis will have stronger positions in military communications, space system payloads, and IT systems. That said, there will be overlap, so layoffs and consolidations are inevitable in a deal of this size. Harris stated that it expects to save some $130-$150 million through workforce cuts and a possible headquarters relocation.