If You Can't Beat 'Em... Buy 'Em

Quietly, without fanfare or much notice from the world's markets, European defense contractors have been buying up aerospace firms in the US. The LA Times reports those transactions have, in themselves, been small -- less than $100 million each. But when you put it all together, The 20 companies European firms have bought so far this year are worth almost $2 billion.

What's the draw? How about the Pentagon's $140 billion budget for procurement and research.

Nice draw.

To get in the door at the Pentagon, most foreign firms need an American partner to satisfy domestic content requirements.

Consider EADS's purchase of 40-year old electronics maker Racal. The price: $105 million. Based in Irving, TX, with a branch in San Antonio, Racal works on lots of things -- cell phones, jet engine parts, avionics and missile guidance components.

BAE Systems is also in the market for more US properties. It recently snapped up DigitalNet Holdings, based in Herndon, VA. That company is a computer networker with close ties to the Pentagon. It's picked up six US companies so far this year, including Cyrano, a firm that makes electronic sniffers that can detect and analyze chemical vapors.

"In aerospace, whether it's civil or military, the U.S. is the largest single market place in the world," said John Ferrie, managing director for the company's aerospace unit, in an interview with the TImes. "If you want to be a player, the US is the place to be."

Congress has tried for decades to ensure the equipment that defends America is, in large part, made in America. Under the Europeans' strategy, that would indeed seem to be the case. But where the products are made in the USA, the decisions on how to make those products will be made from across the Atlantic Ocean.

FMI: www.house.gov/hasc