Tom Mullen, aerospace and defense expert at PA Aerospace and Defense, shares commentary on the proposed Raytheon and United Technologies merger with National Defense Magazine.
The article notes that a day after Raytheon Corp. and United Technologies Corp. proposed its “merger of equals,” analysts and lawmakers sounded off on what would be a seismic shift in the world of defense contracting. United Technologies had already made plans to spin out their air-conditioning and elevator nondefense units and create another aerospace and defense business leveraging its acquisition last year of aircraft parts and subsystem supplier Rockwell Collins, which has since changed its name to Collins Aerospace.
Tom says innovation will be a challenge in such a large organization. "While the combined resources of the firm will be formidable, the spread across so many areas, the challenge of integration, and the legacy cultures of each will make it imperative to do something new around innovation. If they do not manage to create an innovation culture they will struggle to sustain market share.”
He adds: One positive is that the merger could create opportunities for the companies to offer broader systems. “If they are very bold, they could add more capability to the Collins aerostructures business and offer new platforms. At minimum, there are significant opportunities to create cost efficiencies by consolidating manufacturing and corporates.”
But on the other hand, the companies cover a sprawling span of business areas and could require divestments of some assets, he added.
Tom continues: “Carve-outs and sell-off of non-core businesses will add disruption on top of the big challenges of integrating such large and diverse companies.”