By The McLean Group

Given US federal budget uncertainties and volatility in the geopolitical climate, large and small companies alike in the defense and government services sector spent early 2011 focused on their core competitive advantages and taking steps to exploit them in the marketplace. Such strategic divestitures as Lockheed Martin’s sale of PAE and Northrop Grumman’s spin-off of Huntington Ingalls (both discussed below) helped companies hone their core strengths and alleviate potential Organizational Conflicts of Interest (OCI), while providing cash for future targeted acquisitions to reinforce those capabilities, customer relationships and access to key contract vehicles in selected areas.

Meanwhile, buyers envisioned significant growth opportunities in divested assets that might enable them to operate more efficiently and/or grow more rapidly on a standalone basis. Corporate assets deemed superfluous by current owners constituted an ideal opportunity for acquirers seeking to take their firms to the next level. To paraphrase an old saying, “one company’s excess is another firm’s treasure.”

Click here to read more from The McLean Group’s Defense and Government Services Spring 2011 update related to M&A activity analysis, private equity activity, subsector highlights and more.