New Guidance for Defense-Sector M&A Review

Under the HSR,¹ parties to certain mergers and acquisitions (M&A) must file notification with both the FTC and DoJ and observe a waiting period for government review prior to closing. Although the FTC and DoJ are the federal agencies empowered to review large M&A transactions for antitrust concerns, when proposed M&A transactions may impact the defense industrial base, the FTC and DoJ also seek input from the DoD, now the DoW. Indeed, as a result of changes to the HSR Act form, effective in 2025, parties must report certain existing or pending defense or intelligence procurement contracts that might implicate competition issues.

Historically, the FTC and DoJ would share HSR filings with the DoW to obtain agency input concerning transactions involving major defense suppliers. The DoW would then conduct an independent investigation with outreach to affected military program offices and make a recommendation to the FTC and/or DoJ. New guidance, published on Feb. 2, 2026, which implements Section 857 of the FY 2024 NDAA, instructs parties to simultaneously notify DoW of certain M&A transactions. The new guidance contains a non-exhaustive list of transactions that may require DoD review.

Section 857 and the DoW’s recent guidance followed a 2023 Government Accountability Office (GAO) report identifying various deficiencies in the DoW’s review of proposed mergers or acquisitions impacting the U.S. defense industrial base. The GAO report noted the DoW’s repeated concerns surrounding complex challenges and risks facing the defense industrial base, including the consolidation of its supplier base through M&A. The report concluded that the DoW has limited insight into most defense-related M&A because it focuses its resources on assessing high-dollar-value transactions for competition risk in support of antitrust reviews and only reviews a small fraction of defense-related M&A activity due to limited capacity.²

Section 857 of the FY 2024 NDAA

Section 857 of the FY 2024 NDAA provides that “parties to a proposed merger or acquisition that will require a review by the [DoW] who are required to file the [pre-merger] notification and provide supplementary information to the [DoJ] or the [FTC] under section 7A of the Clayton Act (15 U.S.C. 18a) shall concurrently provide such information to the [DoW] during the waiting period under section 7A of the Clayton Act[.]” Legislative history in the Joint Explanatory Statement accompanying the FY 2024 NDAA “clarifies that the [DoW] shall receive information on proposed mergers and acquisitions within the defense industrial base for which it will be asked to review and comment on such notifications, but at the same time as the [FTC] and [DoJ], in order to facilitate that review in a timely manner.”³

The DoW’s recent guidance provides industry stakeholders a non-exhaustive list of transactions that require DoW review in accordance with Section 857 of the FY 2024 NDAA because they may impact competition within the DoW’s programs and the United States defense industrial base:

1. Defense Directed Business: Either party currently, has a history of, or intends to contract with the DoW or perform as a subcontractor on a DoW contract.

2. Critical Technologies: The M&A transaction involves one of the following six critical technologies vital to U.S. national security:

      – Applied AI

      – Biomanufacturing

      – Contested logistics technologies

      – Quantum and battlefield information dominance

      – Scaled hypersonics

      – Scaled directed energy

3. Defense Industrial Base Sector: The M&A transaction involves aspects of the Department of Homeland Security’s Defense Industrial Base critical infrastructure sector.

4. Intellectual Property: One or more of the parties have patents, trademarks, copyright protections, or trade secrets in the above critical technologies or critical infrastructure.

Submission Instructions

The DoW’s guidance directs parties to M&A transactions that meet one or more of the above criteria to email the DoW M&A Division. The email must (1) inform the DoW that the party is contemplating or engaging in an M&A transaction that may require premerger review and (2) confirm whether the party submitted the Notification and Report form to the DoJ and/or FTC.

The DoW states that it will respond within one business day with instructions for submitting the Notification and Report form and additional materials to the DoW through secure channels. Lastly, if parties to an M&A transaction are unsure whether a transaction meets the criteria above for DoW notification, they may contact the DoW M&A Division. The FTC has issued similar guidance.

Impact of the New Policy

The DoW’s recent guidance demonstrates the department’s increased efforts to address consolidation of its supplier base through interagency collaboration with the FTC and DoJ. It also provides clarity as to which types of transactions the DoW believes require its review pursuant to Section 857 of the FY 2024 NDAA. This effort dovetails with the changes to the HSR Act Form effective in 2025, which require parties filing to identify pending bid proposals or awarded bids with the DoW or the U.S. intelligence community valued at $100 million or more, where the parties have direct competitive overlap or compete in vertically related spaces. Notably, though, the DoW guidance seems to require parties making HSR filings to alert the DoW if they have just one defense contract or subcontract. This seems to indicate that the DoW expects companies contemplating M&A transactions with a potential impact on the defense industrial base to engage the agency at the outset of HSR review. As such, parties to a potential M&A transaction involving the criteria listed above should be aware that the DoW expects to be notified of the contemplated transaction.

Several questions remain unsettled, however. The guidance does not make clear how long DoW review might take. The 2023 GAO report noted that in the past, the DoW reviewed only a limited number of transactions due to lack of capacity. With the guidance’s broad definition of transactions subject to DoW review, the DoW may see an influx of potential transactions for review. It remains unclear how quickly DoW will be able to process those submissions. The guidance also does not specify the consequences of failing to make a timely submission to DoW.

Conclusion

The past practice of ad hoc invitations to DoW from the FTC and/or DoJ has been replaced by a new policy from DoW’s M&A team. Those contemplating M&A transactions that trigger HSR filings should consider whether this new policy also requires them to alert DoW.

1 15 U.S.C. § 18a.

2 Id. at 13.

3 H.R. Conf. Rep. No. 118-301, at 1136 (Dec. 6, 2023).