A deal may no longer be a deal as The Federal Trade Commission (FTC) consider a lawsuit to rollback part or all of Northrop Grumman’s 2018 acquisition of Orbital ATK. This would represent the most aggressive anti-trust action yet under the Biden administration. It would signal that the commission is committed to pursuing enforcement even after deals have already been completed, says GlobalData, a leading data and analytics company.

William Davies, Defense Associate Analyst at GlobalData, comments: ‘The lawsuit would create significant uncertainty in the mergers and acquisitions process, through it is unclear whether the FTC has the ability to fully wind back the agreement even if a court decides that Northrop has violated the terms of its original deal.’

The FTC, under the Biden administration, has aggressively pursued an anti-trust policy, blocking Lockheed Martin from purchasing Aerojet Rocketdyne in early 2022 due to concerns about the consolidation of vertical supply chains. The potential lawsuit against Northrop Grumman was triggered by allegations that the company had delayed the sale of rocket motors to Boeing, a concern that Boeing raised when opposing Grumman’s purchase of Orbital ATK in 2018.

Davies contiunues: “The concerns raised by Boeing about the sale of rocket motors is exactly what the administration is worried about, and the threat to undo the deal would be a significant attempt to ensure diversity of supply in the defense supply chain.”

Grumman’s purchase of Orbital ATK was approved in 2018 after significant controversy. Boeing strongly opposed the merger, but the deal progressed after Northrop committed to fair treatment of rival companies. Boeing alleged in 2018 that its failure to progress in the Minuteman III ICBM contract was due to an inability to negotiate with Orbital ATK in a timely fashion.

Davies adds: “This action is an indicator of how political merger approvements are, with the original deal progressing under the Trump administration, while the FTC commission members under the Biden Administration have shown greater interest in taking action against perceived anti-competitive mergers.”