Lockheed Martin’s failed Acquisition of Aerojet Rocketdyne

By: Nirav Patel

Lockheed Martin has announced today that it has decided to call off its $4.4 billion acquisition of Aerojet Rocketdyne due to fears of antitrust action against them by Lina Khan and the Federal Trade Commission. This marks a huge turning point in a hot M&A market and may indicate a coming decrease in mergers and acquisitions in certain key industries. The FTC is also currently fighting transactions in the technology industry, particularly cloud and software acquisitions by Big Tech companies.

The deal would have helped Lockheed grow its product offerings and vertically integrate as Aerojet is already an important component of its supply chain. Acquisitions are increasingly vital to the company’s future growth if it wants to continue to win government contracts and compete with other defense juggernauts including Northrop Grumman, General Dynamics, and Boeing. In particular, it would have enabled greater growth in areas including space exploration, tactical missiles, integrated air and missile defense, and strategic systems.

The FTC’s main purpose is to enforce civil antitrust laws and promote consumer protection by safeguarding the everyday taxpayer. As with every issue, there are two separate sides to this debate. According to James Taiclet, Lockheed’s CEO, the potential acquisition would help drive significant cost reductions and increase speed and efficiency, benefitting the US government, and ultimately, the average taxpayer. However, the FTC sued to stop the acquisition because it has the potential to limit competition in an industry that is crucial to national security and defense. Aerojet Rocketdyne is a leader in propulsion technology that also supplies critical parts to Lockheed Martin’s competitors, which sparks fears of stifling competition, R&D activity, and overall innovation. The FTC has also blocked acquisitions by Elon Musk’s SpaceX in the past.

This trend of a more active FTC also overshadows a lot of the recent deals announced in the news. For example, Cisco Systems recently announced that it was in talks to acquire Splunk, a security and big data analytics software company, for over $20 billion. Whether the FTC steps in is still yet to be seen…