Grundman cited in Defense News, “GD’s Force Protection Buy a Sign of Consolidation”

On the other end of the spectrum, some analysts are questioning whether Gener­al Dynamics, ranked No. 5 on Defense News’ 2010 list, will be able to extract sub­stantial value from the deal. “If the recent historical profitability of the company is indicative of its propensi­ty for profitability in the fu­ture, then General Dynamics is probably overpaying,” said Steve Grundman of Grund­man Advisory. However, Grundman said the acquisition might make sense if viewed as largely a technology purchase. “Force Protection does have great technology in this segment, so maybe what General Dynamics has in mind is to leverage Force Protection’s technology into other customers, and other segments,” he said. . . . Because General Dynam­ics reported having more than $1.5 billion in cash at the beginning of October, and Force Protection’s more than $120 million in cash essentially lowers the net purchase price to roughly $240 million, the price won’t be an issue for General Dy­namics, Grundman said. “In many ways, the price is a rounding error for General Dynamics,” he said. “What’s interesting is the strategy for General Dynamics.” That strategy emphasizes acquiring competitors, Grundman said. “In this case, it’s a little bit harder to say that they’re taking a competitor out of the market, because they alone do not have a product that competes against Force Protection,” he said.

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