Merger marries defense and information

by Heather B. Hayes
for Virginia Business
February 2006

As information becomes just as important as firepower in fighting and winning wars in the 21st century, defense contractors are looking to add information technology (IT) to their portfolio of expertise. General Dynamics, a $19.2 billion weapons-maker headquartered in Falls Church, has moved in that direction with its acquisition of Anteon International Corp., a major IT services firm based in Fairfax. The purchase cost General Dynamics about $2.2 billion in cash and assumed debt.

Acquiring Anteon significantly strengthens the company’s ability to “provide a broad menu of seamless IT services to defense, intelligence and homeland security customers,” says Nicholas D. Chabraja, chairman and CEO at General Dynamics.

The acquisition caps a year in which General Dynamics made a strong effort to expand its ability to go after major hybrid defense/IT contracts in areas such as network security, systems integration and battlefield simulation applications. Anteon marked the fifth IT company General Dynamics brought into the fold.

The company’s efforts are part of a larger trend that is transforming the role of defense contractors. IT is an easy growth area for major companies. The IT industry is relatively unfettered by antitrust regulations. It’s highly fragmented, with plenty of small cash-strapped specialty firms ripe for the taking. And as the military continues its transformation to a more streamlined, information-centric force, it’s expected to begin offering numerous multi-year, high-dollar IT-related contracts.

“The defense market is following the commercial economy out of heavy industry and into services,” Loren B. Thompson, a defense industry consultant for the Lexington Institute told The Washington Post. “That’s what this move is all about. It’s about being in the growth part of the defense sector.”