First, Lockheed discovered suspicious payments to "international consultants" by Titan employees. Upon further examination, these payments turned out to be "potentially improper." Then, when the two companies voluntarily reported their findings to the Securities and Exchange Commission, it opened an investigation into the payments. Consequently, the Department of Justice began its own investigation. While Titan continued to maintain its innocence, it apparently had so little faith that the government would reach the same conclusion that it set aside $3 million as reserves against potential fines.
On Monday, however, there was hope that the deal might ultimately go through. According to a Wall Street Journal report, Titan is planning to negotiate a corporate plea agreement with the DOJ, and has similar hopes to settle the SEC's investigation. The company seems to think that a small fine is worth paying, if it gets the deal with Lockheed done.
For Lockheed's part, I strongly suspect that this defense contractor, too, will bite the bullet and proceed with the acquisition. After all, if this is just a $3 million surcharge on a $1.8 billion sale, heck, Lockheed probably paid more than $3 million on due diligence legal fees alone!
Yet, even using this logic, I think Lockheed has a more compelling reason to proceed with the deal: Titan's employees. Out of Titan's 12,000 employees, 8,800 already have security clearances. That means 8,800 people to whom Lockheed can refer when bidding on contracts with the Pentagon; 8,800 new employees who -- once a contract has been awarded -- do not have to sit, twiddling their thumbs, waiting for the FBI to finish investigating everything from where they rented an apartment two years ago to what exactly they were up to on that family vacation at Euro Disney
In post-September 11 America, with two wars ongoing abroad, "security-clearanced" employees are worth their weight in gold to a defense contractor. And that is why I think Lockheed will not let Titan get away.
Tom and David Gardner offer up two recommendations a month in Motley Fool Stock Advisor . Check it out, risk-free, for six months.
Fool contributor Rich Smith owns no shares in any companies mentioned in this article.
More from The Motley Fool
Don't Laugh, but After Horrible Holiday, Sears Says Profitability Is Still on the Table for 2018
The retailer has few options open to it to get into the black.
4 Things That Can Get Your Resume Thrown Away
Getting hired is a competition. Don't get disqualified before the game really begins.
3 Growth Stocks That Could Put Netflix's Returns to Shame
Looking for the next Netflix? We've identified a video game publisher, a chip company, and an internet-based bank as potentially explosive growth vehicles.