Defense industry mergers and monopoly power : analysis of abnormal earnings using the Edwards-Bell-Ohlson model
Heisey, J. Mark
Moses, O. Douglas
Owen, WaIter E.
MetadataShow full item record
Recent defense industry consolidation has created several large defense firms. As a result of merger activity with their suppliers and competitors, these firms account for an increasing percentage of sales to the Department of Defense. This thesis investigated seven large defense industry mergers, involving 12 defense firms, to assess the effect of the mergers on the firms. Changes in a firms' anticipated abnormal earnings both premerger and post-merger were analyzed to determine whether the defense firms exhibit monopoly power. The merger process was divided into five stages. The Edwards- Bell-Ohlson (EBO) valuation model was used to create measures of firms' expected abnormal earnings at each stage. Each firm's resulting abnormal rates of return on equity were observed and analyzed between stages to track changes in assessments of expected abnormal earnings as the merger process proceeded. Major findings indicate that post-merger abnormal rates of return increased from premerger levels for all firms. These findings are consistent with defense firm earnings power and monopoly position increasing due to merger activity.
RightsThis publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.
Showing items related by title, author, creator and subject.
Zegley, Gary R. (Monterey, California. Naval Postgraduate School, 1997-06);o cope with a shrinking defense budget, the U.S. defense industry has undergone an unprecedented wave of consolidation. Since 1993, Moody's Investors Service has counted over 20 defense industry mergers and acquisitions. ...
An empirical analysis of the patterns in defense industry consolidation and their subsequent impact Nayantara, Hensel (Monterey, California. Naval Postgraduate School, 2007); NPS-AM-07-106The defense industry has witnessed significant consolidation since the end of the Cold War. This paper explores the causes of the wave of defense mergers, as well as their impact. The analysis finds that the frequency of ...
Alfonso, Grisko R. (Monterey, California. Naval Postgraduate School, 2007-12);The United States defense industry has been in a constant state of consolidation over the last 16 years. This thesis reports the impact of these defense related mergers on the cost of military weapons systems. The Selected ...