Northrop's Orbital deal intensifies the arms race in next-generation mission services
Northrop Grumman (NYSE: NOC) rarely acquires companies; so when it does, the defense industry takes notice. That was certainly the case on Sept. 18, when the company broke its years-long M&A hiatus by announcing its intent to purchase Orbital ATK (NYSE: OA). The deal, expected to close in 1H18, would complement and multiply the benefits of Northrop’s internal investments in affordability and technological differentiation, positioning the company well to pursue emerging opportunities at the high end of the defense market, including in space, strategic deterrence and advanced precision munitions. Orbital would prove to be an asset to Northrop, particularly in space and missile systems payload launches. Its position as a key subcontractor to vendors including Boeing (NYSE: BA) and Lockheed Martin (NYSE: LMT) (and their joint venture, the United Launch Alliance) as well as Raytheon (NYSE: RTN), Airbus and Thales Alenia Space indicates its depth of mission knowledge, which will prove vital as Northrop pursues next-generation defense systems procurements, such as the U.S. Air Force’s Ground-based Strategic Deterrent.