Consolidation OF THE U.S. DEFENSE Industrial Base

[...]most of the consolidation of the 1990s took place by acquisition rather than merger; taking on significant amounts of new debt financed most of the transactions. There was a significant increase in the level of assets employed as a result of goodwill and an accompanying increase in debt burden for most of the large acquiring defense companies, notably Lockheed-Martin and Raytheon. Because of the larger debt burden, operating cash flow and income needed to increase to pay the additional interest charges4 if net income and return on equity were to remain fixed. [...]there may be synergy and efficiency in the operations of the combined companies that lead to lower costs or more competitive products, thus justifying a premium over book value. There is no question that the desire to acquire complementary technology and intellectual capital was a significant factor in many of the transactions. [...]we know that the combinations presented opportunities for efficiency improvements because, I believe, in all cases, the surviving combined companies were able to report significant cost savings to