Analysis of Defense Industry Consolidation Effects on Program Acquisition Costs
Abstract
Massive consolidation within the defense industry began after the end of the Cold War. The defense industry felt economic pressures and responded by consolidating at various levels. Merging companies should create a positive synergy by combining the best attributes from each company. This synergy, in theory, should manifest itself in, among other things, a cost savings in defense programs. This thesis examines whether cost changes are evident following consolidation within the defense industry by conducting a regression analysis of Major Defense Acquisition Programs across 13 broad defense market sectors. The findings suggest that while consolidation may yield savings as a result of synergy, this does not seem to be true for all mergers; they do not always save costs. Furthermore, not every merger experiences a statically significant cost estimate change. Comparison of regression results across all the programs examined suggests that when there is a statistically significant cost change following a merger, there is a greater likelihood of cost estimate decrease than increase. A categorical comparison across defense market sectors, branch of service, prime contractors, and company's role during the consolidation experience (i.e., Target or Acquirer) suggests potential trends in cost estimate changes within each category.
Document Details
- Document Type
- Technical Report
- Publication Date
- Dec 01, 2007
- Accession Number
- ADA475971
Entities
People
- Russell V. Hoff
Organizations
- Naval Postgraduate School