Bin Laden’s Death Could Bolster Defense Spending Cuts, Hurt PE Businesses

The assassination of terror mastermind Osama bin Laden could add momentum to President Barack Obama‘s plan to cut military spending, draw down forces in Afghanistan and perhaps hurt private equity investments in companies that rely on troop deployments, sources told Buyouts.

“To the extent private equity either owns or is looking at businesses that depend on the pull of deployed soldiers for revenues, if [Obama is] able to reduce forces faster than he otherwise could have would be bad for those businesses,” an executive with a defense industry consultant, who has worked with numerous private equity firms on deals in the sector, told Buyouts.

The U.S. Defense Department is leading a fundamental review of U.S. military missions at the behest of President Obama, who in April proposed cutting the nation’s defense spending by $400 billion over the next 12 years. Meanwhile, the military is scheduled to start reducing its presence in Afghanistan this summer.

Buyout shops have investments across much of the aerospace and defense spectrum, from technology and strategic consulting contractors like SRA International, which last month agreed to be taken private by Providence Equity Partners in a deal valued at almost $2 billion, to designers of tactical computing systems and mobile command structures like Chandler/May Inc., a company owned by Arlington Capital Partners. Read more about the story in Buyouts.