July 5, 2020

4 Questions Hovering Over the Raytheon-United Technologies Deal to Create a Defense Giant

Some economists believe that a big increase in mergers and acquisitions can suggest that an expansion may be ending. Companies may be more likely to seek partners when they are struggling to increase profits and sales.

So far this year, companies have announced mergers and acquisitions totaling $1 trillion, up 14 percent from the same period last year, according to data from Dealogic.

“What consolidation does, which is what MA is all about, is remove a source of competition, and it is a wonderful way of improving your pricing power position,” said David Rosenberg, chief economist at Gluskin Sheff, an investment firm based in Toronto.

The companies contend that because they are not currently in the same businesses, the merger will not increase the combined firm’s market position in, say, jet engines or missiles. Just 1 percent of the companies’ sales overlap, Mr. Hayes said Monday on CNBC.

“There is nothing anticompetitive about bringing these companies together,” he said.

But antitrust experts say Mr. Trump is right to be worried.

Deals involving businesses that are closely related to each other can strengthen the combined company’s market power. Raytheon and United Technologies have suggested that the deal would create “highly complementary technology offerings,” something that critics of big mergers consider to be a red flag.

“They could use the enhanced footprint and enhanced market power to potentially make it harder for their rivals to compete,” said Diana L. Moss, president of the American Antitrust Institute, a Washington group that advocates stronger antitrust enforcement. “I would imagine that Rolls-Royce, a rival, would be somewhat agitated.”

Article source: https://www.nytimes.com/2019/06/11/business/economy/raytheon-united-technologies-merger.html?emc=rss&partner=rss

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