GD Acquires Large Health IT Company

by: Matthew Potter
August 18, 2011

Category: Boeing, Business Line, Companies, General Dynamics, IT, Lockheed Martin, logistics, medicine, Northrop Grumman Corp. | RSS 2.0

With the foreseeable reduction in U.S. defense spending one way that defense contractors can mitigate its effects is to branch out their business lines into areas that might see increased government spending in the future. That is why the large companies such as Boeing (BA), Lockheed Martin (LMT) and others have been investing in intelligence and cyber security companies and capabilities.

Now General Dynamics (GD) has done the same by acquiring a large health care IT provider, Vangent. THe deal to buy Vangent from its private equity firm owner, Veritas Capital, is valued at almost $1 billion which makes it one of the largest recent M&A moves by a defense contractor in recent times.

Not only is the Defense Department expected to invest heavily in electronic health records and data sharing systems but also Federal organizations like the Veterans Administration (VA), Health & Human Services (HHS), and many of the states. GD through this acquisition is positioning themselves to take advantage of this market. Vangent itself had over the past year invested in smaller companies that had done significant work in the area of government medical services.

The “Obamacare” health reform act is also going to require a large investment in health IT. It will reward doctors, hospitals, insurance companies and other health care providers who spend money on Electronic Health Records and other technology. This will create a large market for companies offering those products which could include GD and other defense contractors like Northrop Grumman (NOC) who have provided government IT services to states such as Virginia.

GD already provides health related services to some parts of the Defense Department including the Medical Communications for Combat Casualty Care (MC4) system. This is attempting to build electronic health care records for military members.

The addition of Vangent will only expand GD’s capabilities and perhaps help it ride out the coming period of reduced investment in weapon systems and combat support networks. It can be expected that other defense contractors may follow suit in the next few years as they look for potential acquisitions who can expand their offerings and products.

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