U.S. defense contracting powerhouse General Dynamics (NYSE:GD) looks set to corner the world market on armored vehicles. Last week, it announced plans to acquire Britain's Alvis (ALV on the London Stock Exchange) -- best known as the maker of the Challenger 2 main battle tank and Warrior armored personnel carrier -- for a little over half a billion dollars in cash.

This being an article about a British acquisition, I can only describe General Dynamics' choice as "brilliant!"

Alvis and General Dynamics already work closely together. Alvis manufactures Piranha II wheeled armored vehicles, under license from General Dynamics' MOWAG subsidiary, and is participating in the development of the next-generation Piranha IV.

For its part, General Dynamics manufactures the U.S. military's main battle tank, the Abrams, as well as its new wheeled armored vehicle, the Stryker (purchased recently from General Motors (NYSE:GM)).

Moreover, despite their collaboration on the Piranha, General Dynamics and Alvis are currently competitors. They sell to different customers in different countries -- customers who presumably force the two companies to compete for sales on price. Take away the competition -- and General Dynamics gets all the sales, with none of the price concessions. (Really, who else are customers going to buy their tanks from?)

Still, nation states, their citizens, and their companies all often disapprove of foreign companies buying up their means of self defense. Britain's BAE Systems (AMEX:BAE), which already owns a 29% stake in Alvis, may make a counter-offer for Alvis' shares in an effort to derail the deal with General Dynamics. Or BAE may simply refuse to sell out to General Dynamics and thus limit the American firm to the role of majority Alvis shareholder.

Moreover, there is no guarantee that the deal will go through even if BAE sells out. Britain's regulators will certainly scrutinize the deal carefully, and when they are done, the European Union's regulators will get a crack at it. (And, as Seth Jayson noted, EU regulators seem to take perverse pleasure in torturing American companies -- like Microsoft (NASDAQ:MSFT) -- brazen enough to compete successfully within their bailiwick.)

One wonders if either the Abrams or the Challenger have armor thick enough to withstand a full frontal attack by the Eurocrats.

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Motley Fool contributor Rich Smith has no ownership interest in any of the companies mentioned in this article (but he thinks their products are way cool).