With a shrinking defense budget, “mega-mergers” between large defense contractors will be unlikely. Instead, the focus of defense industry business development will be on commercial, non-defense work or specialized areas of defense that are still growing. Some of those highlighted areas are intelligence, surveillance and reconnaissance technologies, unmanned aerial vehicles, and cyber security. With fewer contract opportunities, the market could see an increase in the international defense market and an increase of mergers between smaller contractors with similar lines of businesses merging.
Cyber security, in particular, has gained some additional attention from President Barack Obama, with an executive order in February, which expanded the Defense Industrial Base Information Sharing Program. Michael Daniel, national cyber security coordinator and special assistant to the president says, “The government must increase the volume, timeliness, and quality of the threat information it puts out.”
With various cyber threats and legislation expected from Congress, the cyber security line of business will experience growth inside and outside the defense environment. While voluntary coordination is ideal, the White House executive order points to an appetite for regulation, and increased regulation and overhead can lead to a push for investment.
One potential and currently unrecognized benefit of mergers with non-defense companies is that the non-defense companies can bring fresh perspectives to the defense contracting status quo. A worthy company to merge with should have innovative solutions and business practices to contribute to the acquiring contractor. Some of the solutions could be a different approach to costs and opportunities in the changing defense environment.
For job seekers or companies looking to strategically align services and products with growing markets, this also means finding ways to stay ahead of the status quo. In previous years, for job seekers this may have meant additional education or companies trying to hire additional talent, but in leaner times, here are some ways to navigate the job prospects and hone individual or corporate expertise when looking at ways to get into defense contracting, changing careers, or acquiring strategic contracts in growing markets:
- Look at Broad Agency Announcements to get a glimpse of where an agency is heading. Stringing a couple of BAA cycles together can help create a picture of where an agency is strategically headed.
- Look at Science and Technology. Many larger organizations have an “S&T” element. These are groups that tend to act on the strategic guidance for the organization.
- Invest in research, development, testing and evaluation (RDT&E)…both as an internal R&D focus and seeking out agencies that fund with RDT&E funds. Again, these are going to be the agencies that tend to have a feel for the direction of future government spending.
- Look at Challenges (made famous by the DARPA Grand Challenge). This is one way that the government is looking for innovative solutions to requirements.