Though many defense contractors say they're now taking a break from mergers and acquisitions, some say they expect to be able to capitalize on a wave of deals once the COVID-19 pandemic has come to an end.
In a call with analysts last month, Mark Aslett, the chief executive of Mercury Systems, said the M&A market "is effectively shut right now."
But, "once we get through the crisis, we anticipate seeing more opportunities than before," he said. "Certain companies may be motivated to sell in this environment. They look for a partner that's fiscally sound, has a great culture and values, has done the right things for employees and has continued to deliver for customers and shareholders. We are one of those companies."
John Mengucci, the CEO of CACI International, said his company also is seeing a "temporary hiatus" for M&A.
"Our company is going to look slightly different coming out of this," he told analysts last week. "Other potential companies will as well. But don't take that to mean we're not looking at potential acquisitions and pursuing relationships."
"We still have the phone," he continued. "We still have webcasting, we're able to meet and go out there and still continue to touch companies that we were already out there touching prior to COVID-19."
Aslett said Mercury believes M&A activity will resume -- but that it's hard to predict timing.
"At the very start of the quarter, it was very, very active from an M&A perspective," he said. "But when the crisis really took ahold, we saw things really grind to a halt almost mid-quarter. So we do think it's going to come back. It's hard to determine exactly when."
Andrew Hunter of the Center for Strategic and International Studies said he predicts a "wave of consolidation" in the post-pandemic time period.
"I say that in part because I think we were already poised for a wave of consolidation in the defense industry," he said during a webinar last month. Hunter pointed to several recent large deals, including Raytheon's merger with United Technologies and L3 Technologies' deal with Harris.
"These were all actually pretty significant moves . . . and I think they're the opening round," Hunter continued.
Still, some say they're not certain they want to participate in the market that follows the crisis.
Nick Howley, the executive chairman of TransDigm, told analysts this week his company is "more cautious now than we would have been six months ago" when it comes to M&A.
"We're probably a little more skeptical of any valuation someone would come up with," he continued. "We buy good businesses and try to make them very good. We typically don't buy fixer-uppers or bad businesses."
"We're looking for proprietary stuff with a fair amount of aftermarket," Howley said. "Generally, people don't sell that kind of stuff in depressed times."