The Defense Department remains skeptical of mergers involving its major contractors, a Pentagon official said on Wednesday, amid industry expectations that defense deal-making could revive this year.

Elana Broitman, whose office at the Defense Department reviews deals that involve national security issues, told an investor conference that “there are far fewer of the large firms, so we’re in a more constrained environment.

“Even though we’re seeing a budget downturn which has corresponded to consolidation in the past, we’d be less comfortable now because of that smaller number,” said Broitman, the acting deputy assistant secretary of defense for manufacturing and industrial base policy.

Defense M&A activity ground to a near halt in recent years amid uncertainty about future U.S. military spending that has kept sellers on edge and buyers more apt to invest in share buybacks and dividend payouts than acquisitions.

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