Raytheon Technologies 2020

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In mid 2019, global leading suppliers United Technologies Corporation and Raytheon Company announced their intention to merge their businesses in what would become largest M&A transaction in the history of Aerospace & Defense (A&D) industry. Despite markets’ concerns from different stakeholders such as the United States Government, customers and suppliers, as well as the strong objection of certain activist investors, the two companies will successfully complete their merger on April 3rd, 2020, resulting in the creation of Raytheon Technologies Corporation; the largest A&D supplier in the world with approximately US$74 billion USD in pro-forma 2019 net sales and a global team of 195,000 employees, including 60,000 engineers and scientists. The new combined company is now expected to generate important financial synergies (i.e. US$1 billion in gross cost synergy starting year four, mitigation of United Technologies’ debt) and more importantly, to leverage the technological complementary of the newly merged businesses in order to drive major innovations and the creation of new technologies and new markets (i.e. hypersonic, big data, AI, cybersecurity). However, this merger comes at a challenging time for the A&D industry. Despite the sustained increase in demand for both commercial aircraft and defense products in recent years, airframers, airliners and defense contractors have been struggling to improve their profits and to increase their production capacity. Moreover, new developments projects continue to face systematic issues to meet their established deadlines and budgets, causing major delays and losses. To make things even worse, the merger was completed at a time where the world is facing a global pandemic that hit the aerospace industry harder than any other sector. Even before this mega merger, consolidation has been a major trend in the A&D industry in recent years, as the race for scale continues to reshape the competitive landscape. The present case attempts to stimulate a reflection around the benefits and threats of this trend through Raytheon Technologies example, by assessing the impacts of such a large deal on the ecosystem, and more specifically on the supply chain side.

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