Contractors Spinning off Divisions as Defense Budget Ax Falls

April 14, 2013

Pentagon budget cuts were supposed to herald a wave of consolidation in the defense industry. Instead, they’re prompting contractors to shrink by spinning off divisions.

McLean-based Science Applications International Corp. plans to split into two companies by February, and L-3 Communications Holdings last year spun off a $1.7 billion unit that provides government services. Bethesda’s Lockheed Martin and Northrop Grumman of Falls Church also have sold divisions to private investors, as Pentagon spending on contracts declined from its 2009 peak.

Such moves contrast with the wave of mergers during the 1990s, when military spending fell following the Cold War’s end. No acquisitions have been announced this year by the top 10 defense contractors.

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