This week is not the first time the DOJ weighed in on mergers and acquisitions in the national security space, and it certainly won’t be the last. The DOJ has filed a civil antitrust lawsuit with the intent of blocking Booz Allen from acquiring EverWatch. The DOJ filed the complaint in Maryland, alleging that the merger agreement threatens competition for operational modeling and simulation services to the National Security Agency (NSA). The DOJ contends that if this acquisition isn’t stopped, then competition would be eliminated for a specific contract at the NSA.
Competition Needed
The NSA needs contractors who provide operational modeling and simulation services in supporting their signals intelligence data missions. Booz Allen and EverWatch have competed against each other previously for this NSA contract as the only two bidders. Before the request for proposal (RFP) was released, the two organizations decided to join forces instead. The DOJ’s complaint is that this would create a monopoly bidder for the NSA and violate Section 1 of the Sherman Act. Neither organization would need to bid aggressively to outbid each other if they simply work together. The DOJ goes one step further, pointing out that the acquisition would be in violation of the Clayton Act, since it lessens competition.
“Booz Allen’s agreement to acquire EverWatch imperils competition in a market that is vital to our national security,” said Assistant Attorney General Jonathan Kanter of the Justice Department’s Antitrust Division. “Both the acquisition agreement and the underlying transaction violate federal antitrust law.”
The Department of Defense has previously taken on mergers and acquisitions, with February report calling out the state of competition in the Defense Industrial Base (DIB) and pushing for more competition rather than consolidation.
“Since the 1990s, the defense sector has consolidated substantially, transitioning from 51 to 5 aerospace and defense prime contractors,” the report noted. As a result, DoD is increasingly reliant on a small number of contractors for critical defense capabilities.”
Booz Allen, EverWatch, and the NSA
Booz Allen is headquartered in McLean, VA, and they have an office in Annapolis Junction, MD, as well as, multiple locations throughout the country. The company has pushed back against claims the merger would harm competition and has pushed that the companies have ‘complementary capabilities’ that will benefit the government.
“We strongly disagree with the DOJ’s characterization of the proposed transaction,” a spokesperson for Booz Allen said in a statement.
“We continue to believe the transaction would deliver significant benefits to our government clients in an industry that is highly competitive,” the statement said. “We refute any suggestion that the proposed transaction would harm government agencies or taxpayers, and are ready to vigorously defend ourselves against any allegation of anticompetitive behavior.”
EverWatch, a subsidiary of EC Defense Holdings LLC, is headquartered in Reston, VA. They also have an office in Annapolis Junction, MD.
Both contractors play a key role in providing support to the NSA, a leading defense intelligence agency, specializing in cryptology, signals intelligence, and cybersecurity. The agency is responsible for providing signals intelligence to our nation’s policymakers and armed forces. Signals intelligence, which is derived from electronic signals and emissions in communications systems, plays a vital role in our national security by providing America’s leaders with critical information needed to defend the United States and to advance the country’s goals and alliances globally.
