Large defense companies acquire pure-play homeland security players

Large-scale consolidation is underway across the board in the defense industry, as security companies vie for the most complete and integrated solutions that will give them a competitive edge when competing for large, government contracts, analyst Daniel Meron of RBC Capital Markets says.

“In homeland security you are just as strong as your weakest link,” Meron said. “So having the best biometric system, having the best video system, the best motion detection system is not enough; this is not what’s going to cut it.”

The Wall Street Transcript reports that according to the analyst, the larger and more established defense companies, such as Lockheed Martin and Northrop Grumman, are able to integrate the systems of smaller homeland security companies to build more complete defense strategies.

“If you’re not able to implement the best security across all your airports, even one in Chattanooga, Miss., or whatever it is, then your entire air system is exposed to potential terrorism,” Meron said. “That’s why government, instead of going after best of breed that they sometimes initiated, is going for more integrated solutions across the board to enable them to meet those requirements.”