Eric Chewning and Frank Coleman, partners at McKinsey & Co., wrote in a commentary published Monday on Defense News that contractors seeking to support the Department of Defense’s evolving mission requirements and create value in a challenging budget environment should take a programmatic approach to mergers and acquisitions.
“Mergers and acquisitions are a proven growth accelerant for defense companies, and have generated superior shareholder returns and greater resilience for companies that have pursued it systematically,” Coleman and Chewning wrote.
With programmatic M&A, a company makes two or more small or midsized transactions each year “with an aggregate value greater than 15 percent of its market capitalization over five years, that align with their overall corporate strategy” and carry out these deals around a specific business case like adding digital capabilities, Coleman and Chewning wrote.
“In the defense industry, programmatic M&A should be deployed against a strategy supported by the customer’s need for innovation, lower costs and better mission outcomes for the war fighter,” they added.
