The Department of War's M&A Review Guidance: What Companies in the Defense Industry Need to Know

In February 2026, the Department of War ("DoW") issued guidance implementing Section 857 of the FY2024 NDAA and elevating the DoW's historically ad hoc role in defense-related M&A review to a mandatory, though nebulous, notification requirement on the transaction parties. Section 857 addressed the perceived inadequate participation of DoW in the review of defense-related M&A transactions, which amounted to only about 10% of those transactions annually. A 2023 GAO report noted that the DoW participation had depended entirely on discretionary referrals from the FTC and DOJ during Hart-Scott-Rodino ("HSR") reviews. Under the new Section 857 framework, the parties must file a pre-merger notification with DoW concurrently with the FTC and DOJ. The deal parties must notify the DoW of their transaction when it meets one of four broad, non-exhaustive criteria: defense-related business history, involvement in six designated critical technologies, connection to the Defense Industrial Base critical infrastructure sector, or relevant intellectual property. Significant uncertainties remain, including the statute's lack of clarity as to when DoW review is required, undefined review timelines, DoW's resource constraints given the guidance's broad scope, and unspecified consequences for noncompliance. Nevertheless, Section 857 and the DoW guidance will certainly enhance the ability of the FTC and DOJ to assess the national security implications of the M&A transactions they review. As this DoW notification requirement is refined through practice, companies across the technology, healthcare, infrastructure, and manufacturing sectors should integrate DoW's criteria into deal diligence and, if applicable, DoW notification into closing checklists alongside traditional HSR and CFIUS analysis.

I. A NEW ERA FOR DEFENSE-SECTOR M&A COMPLIANCE

The compliance landscape governing mergers and acquisitions ("M&A") in the defense industrial base has fundamentally changed. In February, the Department of Defense, now commonly referred to as the Department of War ("DoW"), published guidance implementing Section 857 of the Fiscal Year 2024 National Defense Authorization Act ("NDAA"). That guidance replaces a largely informal, ad hoc transaction review process with a structured, proactive, though somewhat nebulous, notification requirement that places the compliance burden on the parties to the transaction with unknown consequences for lack of compliance. Companies engaged in defense-related M&A transactions that trigger Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR") pre-merger filing requirements must now determine whether they are also required to notify the DoW concurrently with the Federal Trade Commission ("FTC") and the Department of Justice ("DOJ"). Buyers and sellers in the defense sector, and in some cases beyond, must factor this new requirement into the timeline of their transactions. As a consequence of this developing implementation of Section 857, DoW will be better informed on a timely basis about M&A activities that may impact the defense industrial base, and the FTC and DOJ should be better informed about relevant national security considerations during their HSR reviews of M&A transactions.

This policy shift did not occur in isolation. It follows a broader trend of the federal government layering additional national security review onto the traditional antitrust merger clearance process. Much as the Committee on Foreign Investment in the United States ("CFIUS") added a national security screen to foreign investment transactions, the DoW's new notification regime extends an enhanced national security consideration to domestic defense-sector M&A. Unlike CFIUS review, however, DoW's guidance notification requirement is not a formal statutory clearance regime with defined deadlines or presidential authority to block a transaction. DoW appears to have no enforcement teeth to penalize non-compliance with the guidance, and how the FTC or DOJ view a deal party's non-compliance with the DoW guidance is unclear. For now, the DoW guidance establishes an information-sharing mechanism designed to ensure that the agency with the deepest expertise regarding the defense industrial base, DoW, will regularly and consistently have a seat at the table when the FTC and DOJ evaluate the competitive effects of a proposed M&A transaction.

For deal counsel trying to comply, the practical consequence is straightforward: due diligence checklists for aerospace, defense, and adjacent technology transactions must now include an early assessment of whether Section 857 and the DoW's guidance apply, alongside the traditional analysis of HSR reportability, CFIUS jurisdiction, and industry-specific regulatory approvals.

II. THE PROBLEM SECTION 857 WAS DESIGNED TO SOLVE

For years, the DoW's involvement in antitrust review of defense-sector mergers was reactive and limited. The FTC and DOJ would occasionally consult the DoW when a proposed transaction appeared to implicate the defense industrial base, inviting the agency to review HSR filings and offer input on competitive effects. There was, however, no statutory mechanism requiring that outreach. In a 2016 joint statement, the DOJ and FTC explained that they "rely on [DoW's] expertise, often as the only purchaser, to evaluate the competitive impact of mergers, teaming agreements, and other joint business arrangements between firms in the defense industry."2 The DOJ and FTC's goal here is to ensure there is competition in the products and services purchased by DoW. In practice, however, the DoW was frequently left out of the loop because its participation depended entirely on the FTC's or DOJ's decision to ask for the DoW's views.

A 2023 Government Accountability Office ("GAO") report brought considerable attention to the perceived gap in the total number of M&A transactions reviewed and the number in which DoW provided its insight and equities for consideration. The GAO found that the DoW recorded approximately 400 defense-related M&A transactions in 2017 alone but reviewed only about 40 transactions per year on average between fiscal years 2018 and 2022—roughly ten percent of the total.3 The report also identified numerous transactions during that period that presented potential risks to national security yet received no DoW scrutiny, because neither the FTC nor the DOJ had consulted the department. The GAO attributed this gap to two related causes: (i) the DoW lacked clear internal criteria for prioritizing which transactions to review; and (ii) it lacked the staffing and resources necessary to review more than a small fraction of the deals occurring across the defense industrial base within the timeframe within which the FTC and DOJ conducted their reviews.

Notably, the DoW was not entirely without a framework for assessing mergers prior to Section 857. Under DoW's Directive 5000.62, first issued in 2017, the agency's Office of Industrial Base Policy was tasked with evaluating the effects of proposed mergers, acquisitions, joint ventures, investments, and strategic alliances of major defense suppliers.4 That directive instructs reviewers to weigh factors including the transaction's effect on national security, competition for DoW contracts and subcontracts, the risk that a critical supplier could become unavailable to competitors of the merging parties, potential cost savings or other benefits to the DoW, risks to the financial stability and continued stewardship of critical military capabilities, and the DoW's continued access to affordable and innovative sources of supply, including data rights. What Directive 5000.62 did not and, in part could not, do, however, was specify which transactions triggered a required DoW review or establish any obligation for parties, the FTC, or the DOJ to bring transactions to the DoW's attention in the first place.

Section 857 of the FY 2024 NDAA was crafted to redress that deficiency, but its approach was curious. The statute provides that "parties to a proposed merger or acquisition that will require a review by the [DoW]" and that are required to file HSR notifications with the DOJ or FTC "shall concurrently provide such information to the [DoW] during the waiting period under the Section 7A Clayton Act."5 According to the Joint Explanatory Statement accompanying the FY 2024 NDAA, Congress intended for the DoW "to 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."6 Notably, the statute does not itself define which transactions "will require a review" by the DoW, a gap that the February 2026 guidance was designed to fill.

III. THE FEBRUARY 2026 DOW GUIDANCE

While Section 857 established the legal hook for concurrent notification by the deal parties, it left several open and critical questions unanswered. The most important question remained: which transactions actually require DoW review? Neither the statute nor Directive 5000.62 specified a mandatory trigger.

The February 2026 DoW guidance, titled "Criteria and Instructions for Parties to M&A Transactions to Notify the Department of War," begins to fill that gap by identifying four criteria for transactions that the DoW believes require its review.7 Any of the following four criteria may trigger the notification obligation:

1. Defense Directed Business: Any transaction in which either party currently contracts with the DoW, has a history of doing so, or intends to pursue DoW contracts or subcontracts in the future. This is the broadest category and is likely to capture the largest number of transactions. Any company with even a modest footprint in the defense sector, including a single active or historical contract, should assume this criterion applies to it.

2. Critical Technologies: Transactions involving any of six technologies the DoW's Office of the Under Secretary of War for Research and Engineering has identified as vital to U.S. national security: (i) applied artificial intelligence; (ii) biomanufacturing; (iii) contested logistics technologies, such as advanced satellites and unmanned surface, underwater, and aerial vehicles; (iv) quantum and battlefield information dominance, including communications and navigation systems; (v) scaled hypersonics, such as hypersonic missiles and related weapons systems; and (vi) scaled directed energy, including high-energy lasers. Companies operating in these sectors should assess whether their transactions fall within this category regardless of whether they hold active defense contracts.

3. Defense Industrial Base Sector: Transactions that involve aspects of the Department of Homeland Security's Defense Industrial Base critical infrastructure sector, which broadly encompasses the research, development, design, production, delivery, and maintenance of military weapons systems, subsystems, and components. This category overlaps substantially with the first criterion, is potentially extremely broad, and draws on the critical infrastructure sectors originally established by Presidential Policy Directive 21. It reflects the DoW's interest in preserving the integrity of supply chains and infrastructure that underpin national defense capabilities.

4. Intellectual Property: Transactions in which one or more parties hold patents, trademarks, copyrights, or trade secrets related to the critical technologies listed above or to defense industrial base critical infrastructure. This category can reach companies that may not consider themselves defense contractors at all, but whose intellectual property could be relevant to national security.

The guidance's breadth is noteworthy. Yet, importantly, the guidance states that these categories are non-exhaustive, meaning that even transactions falling outside the specified criteria may still be subject to DoW review. Because DoW has framed these as separate categories and has expressly labeled them non-exhaustive, a transaction need only touch one of the enumerated categories, even tangentially, to fall within the DoW's stated scope of interest.

IV. HOW THE NOTIFICATION PROCESS WORKS

Section 857 and the DoW guidance require parties to a transaction that triggers HSR filing obligations and meets one or more of the above criteria (or some as yet unspecified criterion) to send an email to the DoW's M&A Division. That email must state two things: (i) that the parties are contemplating or engaged in an M&A transaction that may require pre-closing review, and (ii) whether the parties have already submitted their HSR Notification and Report Form to the DOJ and the FTC. The DoW has ambitiously committed to responding to those initial notice emails within one business day. The Division's response email will then provide instructions for submitting the Notification and Report Form and additional supporting materials through secure channels, such as the Department of Defense's Secure Access File Exchange system. Parties who are uncertain may contact the DoW's M&A Division directly for a determination whether their transaction meets the DoW's stated or unstated criteria or for other guidance and assistance.

Parties may be asked to provide Commercial and Government Entity ("CAGE") codes or Unique Entity IDs ("UEIs") associated with the entities affected by the transaction, allowing the DoW to cross-reference the parties against its existing contractor records. The FTC has also issued complementary guidance on its own website confirming the concurrent-notification expectation.8 Parties should expect that HSR filings submitted to the DoW will receive the same confidentiality protections that apply under the HSR Act itself: the filings are treated as highly sensitive, are not shared with other divisions within the DoW, and are ultimately destroyed once the HSR waiting period expires or the FTC and DOJ otherwise close their review.

Notably, there is a conflict between the statute and the guidance regarding the timing of notification. Section 857 requires parties to provide notice only during the HSR waiting period, meaning after the parties have already submitted their HSR filings. The DoW's guidance, however, suggests that parties should notify the agency even when they are merely contemplating a transaction, before any HSR filing has been made. This raises questions of whether Section 857 imposes a freestanding notification obligation at all, since the statute conditions the duty to notify on a transaction that "will require a review" by the DoW without ever specifying when that condition is satisfied. This compliance nuance should be carefully evaluated at the earliest stages of deal negotiation and later transaction structuring.

V. KEY COMPLIANCE CONSIDERATIONS

Companies engaged in or considering defense-related M&A transactions should be asking the following questions during the diligence process:

· Does either party currently hold, or have a history of holding, DoW prime contracts or subcontracts? Even a single contract, depending on its significance, may be sufficient to trigger a reportable category.

· Does the transaction involve any of the six enumerated critical technologies? This analysis should extend beyond a company's core products to include adjacent capabilities and ongoing research and development projects.

· Does either party hold intellectual property that touches the critical technologies or defense industrial base sectors described in the guidance? Transaction parties should review patent portfolios and trade secret repositories with this question in mind.

· Does the transaction already require an HSR filing? If so, the parties may need to integrate DoW notification obligations into the closing checklist alongside the standard FTC and DOJ filings.

· Does the transaction involve an executive compensation arrangement, minority investment or other non-merger transaction that nevertheless triggers an HSR filing? The DoW's criteria, without future guidance providing carveouts, are broad enough to capture such HSR filings if the target otherwise meets one of the four categories described above.

VI. OPEN QUESTIONS AND AREAS OF UNCERTAINTY

While the DoW's February 2026 guidance provides a welcome measure of non-exhaustive clarity regarding the 2024 NDAA's notification requirement, several significant questions remain.

Legal Authority: There are questions on whether Section 857, properly read, actually "requires" DoW review of any transaction at all, since neither the statute, Directive 5000.62, nor any other DoW policy identifies when a transaction "will require" DoW review in the first instance. On this view, the February 2026 guidance functions less as a binding legal mandate and more as the DoW's own articulation of the categories for which it expects, but cannot compel, advance notice. Whether that distinction has practical significance for enforcement remains to be seen, and deal parties should not assume that the absence of a clear statutory trigger reduces the practical necessity of compliance, particularly given the DoW's stated expectations.

Timing: The DoW has not specified how long its review of submitted filings will take, nor has it committed to a formal timeline for its assessment. Whether the FTC and DOJ will close their HSR reviews while the DoW is still evaluating a transaction remains to be seen. If so, a delay at the DoW could meaningfully lengthen overall deal review timelines and increase transaction costs, particularly for deals that previously would not have triggered such government scrutiny.

Resources: There are likely resource allocation issues as well. The 2023 GAO report noted that the DoW historically lacked the resources to review more than a fraction of defense-related M&A activity. The guidance's extremely broad notification categories will almost certainly produce a significant increase in the volume of submissions the department receives, and it remains to be seen whether the DoW has the capacity to process those submissions in a timely manner. That the DoW issued the Section 857 inspired guidance, however, might signal that the DoW is prepared to commit the resources to the HSR concurrent reviews and timely provide input to the FTC and DOJ in a greater percentage of cases than has been the practice.

Non-Exhaustive Categories: The non-exhaustive nature of the notification criteria also introduces compliance uncertainty. Because the listed categories do not define the full universe of transactions subject to DoW review, parties cannot be entirely confident that a transaction falling outside those categories is definitively exempt. When in doubt, transaction parties should seek the advice of their regulatory counsel or accept the DoW's M&A Division's invitation to contact them directly.

Consequences of Noncompliance: Neither Section 857 nor DoW's guidance specifies what happens if parties fail to provide timely notice, whether through oversight or a good-faith judgment that none of the four criteria applied. It is unclear whether the DoW would treat a missed notification as a basis to seek some sort of voluntary cooperation after the fact, to flag the omission to the FTC or DOJ, or to take some other action. There is no statutory hook in Section 857 that relates to enforcement authorities, and whether there are any resources allocated to enforcing non-compliance is an open question. However, deal parties should not assume that the absence of an express penalty provision eliminates the practical risk of overlooking the requirement, particularly where Congress is directing increased interagency coordination on antitrust.

VII. WHAT TO DO GOING FORWARD

Companies that have historically focused their pre-merger regulatory analysis primarily on FTC and DOJ review must now add DoW engagement to their checklists whenever a transaction has any meaningful connection to the defense sector. The DoW guidance's scope suggests that a wide range of companies across the technology, healthcare, infrastructure, and manufacturing sectors will now find themselves within the DoW's M&A review pipeline, even if they do not think of themselves as traditional defense contractors.

Early engagement with experienced counsel is essential. Identifying DoW notification obligations at the deal-structuring stage allows parties to integrate DoW outreach into the overall regulatory strategy, prepare responsive materials in advance, and avoid unnecessary delays once the HSR waiting period begins. Parties should also expect that DoW involvement, once triggered, may extend beyond a passive review of the HSR filing: consistent with its historical practice, the DoW may coordinate directly with the specific military program offices affected by a transaction and participate in briefings alongside FTC and DOJ staff.

As the DoW continues to build out its review infrastructure and the FTC and DOJ refine their coordination with the department, the contours of this new process will continue to evolve. Companies active in the defense sector, as well as those operating in the critical technology areas identified above, should monitor further developments closely, including any subsequent guidance clarifying review timelines or the consequences of noncompliance.

Republished with permission. This article, "The Department of War's M&A Review Guidance: What Companies in the Defense Industry Need to Know," was published in CPI Antitrust Chronicle's September 2026 issue.