Lockheed Martin (LMT, Financial), the American defense giant recently declared an acquisition deal last week on Wednesday saying that it wishes to buy Deposition Sciences Inc. – a company that makes thin-film coating for defense and commercial application and is based out of Santa Rosa. If all goes in favor, Lockheed should complete the deal within the next 30 days. The defense major has kept the financial terms of the deal under cover.
The game plan
Lockheed plans to combine Deposition Sciences, which is a subsidiary of Advanced Lighting Technologies, with its aeronautic wing without making much of alterations. Co-founder of Deposition Sciences Lee Bartolomei, which has 85 people working in their payroll, would continue to lead the company and be the chief executive officer of the unit after the acquisition is done.
The Maryland headquartered company is looking forward to getting acquired by Lockheed as it senses tremendous opportunity to grow. It would get exposed to Lockheed’s expertise gained over the years together with an exposure to global customers. Lockheed is a much bigger company employing 113,000 people across the globe and posted around $45.4 billion in sales in the previous fiscal year.
In the words of Johndroe, the deal would “broadens our technological capabilities.” Lockheed’s strategy to get hold of smaller players indicates the kind of small but essential synergies small companies may bring about in the bigger ones. And the integration of such technology may remarkably add to Lockheed’s competitive position.
The defense major could also put in money in extensive research for future development and expand of the business, which in turn would increase revenue, profits and return to shareholders.
Managing Pressure
The U.S. defense spending cut has had an effect on Lockheed as more than 80% of the revenue earned comes from government contracts. Defense budget is expected to remain stressed I this decade and Lockheed forecasts its revenue to take a toll this year as well. There are two ways in which the company is working to handle the situation. First, it can push the production rate of its popular F-35 production that makes for nearly 16% of the company’s consolidated revenue. At the same time it should increase focus in international markets which would bring about major growth in the decade as U.S. defense budget remains stunted.
Second, acquisitions such as these would help Lockheed gain competence, and in difficult environment as such, it could play an important role in gaining contract, improving portfolio offering, and aiding top line growth. Deposition Sciences makes uses of different deposition technology and methods that are required to manufacture the thin film coat that is used for various applications.
DepartingThoughts
Merger and acquisition activities had almost become dormant in the U.S. defense segment. But Lockheed Martin seems to have broken the sleeping trend. This year defense contractors are getting their hands on quite a few companies through acquisitions. Through this year, Lockheed has announced three acquisitions that would enhance the company’s product and technology portfolio and widen its access to different customers.
