L3Harris Takes a BREAK From M&A

Aerospace and defense contractor L3Harris Technologies completed two deals last year. In July, it purchased Aerojet Rocketdyne Holdings for $4.7 billion; earlier, it acquired Viasat’s tactical data link business for $2 billion.

For now, that’s enough.

L3Harris confirmed at its recent “investor day” event, where company brass provide a review of all financial objectives, that it plans to suspend M&A activity for the “foreseeable future.” L3Harris has been generating impressive results. It anticipates generating revenue of $23 billion through 2026; for perspective, it reported $17 billion in annual revenue in 2019, when L3Technologies and Harris merged to form L3Harris.

Instead of deals, it wants to strengthen its balance sheet and improve shareholder value, according to Chair and CEO Christopher Kubasik.

“We will focus on driving operational improvements to enhance productivity, reduce expenses, drive margin expansion, and generate strong cash flow,” Kubasik said last month at the company’s Melbourne, Florida headquarters.

Unclear is whether L3Harris will put the brakes on buying, selling, or both. Just a couple of weeks earlier, the firm found itself in the target position when it agreed to divest its commercial aviation solutions business to an affiliate of the Jordan Company (TJC), a private equity firm, for $800 million. The purchase price includes $700 million in cash plus a $100 million earnout once certain financial performance targets are met; the transaction is expected to close in the first half of this year. On the same day it confirmed its M&A plans were on hold, L3Harris also named two new directors to its board: Kirk Hachigian, former CEO of JELD-WEN Holding, and William Swanson, retired CEO of Raytheon Company, effective immediately. D. E. Shaw Group, one of L3Harris’s largest investors, will help pick an additional independent director to be added to the board sometime this year.