4 Questions Hovering Over Deal to Create a Giant Defense Contractor

So far this year, companies have announced mergers and acquisitions totaling $1 trillion, up 14 percent compared with the same period last year, according to data from Dealogic.

“What consolidation does, which is what M&A is all about, is remove a source of competition, and it is a wonderful way of improving your pricing power position,” said David Rosenberg, chief economist at Gluskin Sheff, an investment firm based in Toronto.

The companies contend that because they are not currently in the same businesses, the merger will not increase the combined firm’s market position in, say, jet engines or missiles. Just 1 percent of the companies’ sales overlap, Gregory J. Hayes, the chief executive of United Technologies said Monday on CNBC.

“There is nothing anticompetitive about bringing these companies together,” he said.

But antitrust experts say Mr. Trump is right to be worried.

Deals involving businesses that are closely related to each other can strengthen the combined company’s market power. Raytheon and United Technologies have suggested that the deal would create “highly complementary technology offerings,” something that critics of big mergers consider to be a red flag.

“They could use the enhanced footprint and enhanced market power to potentially make it harder for their rivals to compete,” said Diana L. Moss, president of the American Antitrust Institute, a Washington group that advocates for stronger antitrust enforcement. “I would imagine that Rolls-Royce, a rival, would be somewhat agitated.”

United Technologies and Raytheon will most likely need to convince the Pentagon that a merger will not reduce incentives to provide the most advanced and inexpensive technologies. The Defense Department has blocked some previous mergers — including Lockheed Martin’s proposed purchase of Northrop Grumman in the late 1990s — after concluding that the deals threatened competition.

The government’s foremost concern is that there is sufficient innovation in the defense sector to design and produce new weapons systems, said William Kovacic, a professor at George Washington University Law School and a former chairman of the Federal Trade Commission. “Any shrinking in the number of these enterprises ought to be a matter of concern for the defense agencies and for government antitrust agencies.”

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