Finmeccanica goes to America- the Drs case study

Topics: Finmeccanica, BAE Systems, Arms industry Pages: 39 (11601 words) Published: October 15, 2014
2014

Study of an Acquisition

THE CASE OF FINMECCANICA & DRS TECHNOLOGIES
ALESSANDRO LUCI | DANIELE MAGLIO | MARCO MARANA | RAFFAELE MASI SILVIA MATTEI | GIULIA MEZZANOTTE MARCO DEL SAVIO

LUISS GUIDO CARLI |Corporate Strategies a.a 2013/2014

In this paper we will analyze the dynamics of the biggest acquisition by an European company in the field of the American defence in the history, the one between the Italian-owned Finmeccanica and the American Drs Technologies.

Finmeccanica is a symbol of the Italian proud worldwide, and through this acquisition will become the second major foreign supplier of the Pentagon.
In the first part of our work, we will go a bit in depth into the history and strategic moves of the two companies separately. Finmeccanica’s strategy in particular will be crucial to understand the reasoning of this acquisition, together with the so called globalization of the Defence market, that is taking place worldwide and that in the last decades is re-shaping the whole defence industry.

This paper will go further in depth in analyzing the American defence industry and its role in the global economy, we will discover the financial repercussions of the acquisition for both companies and only in the end we will come up with both a short-term and a long-term paramount of the acquisition after the deal was closed.

The main questions we will answer in this paper are:
Why should this operation be of such importance to Finmeccanica? What does it mean to become one of the top player suppliers in the American Defence industry?
Why did Finmeccanica pay such a large price to acquire Drs Technologies? Was the acquisition of Drs worth such a big price after all?

1

ABSTRACT

3

Finmeccanica
History

6

Swot Analysis

10

Porter’s 5 Forces

10

Drs Technologies
History

14

Company Organization

14

Swot Analysis

15

Porter’s 5 Forces

15

Why Drs: A Matter Of Complementary Synergies

18

The Benefits Of A Transatlantic Operation

19

Finmeccanica ‘S Main Rival: Eads

21

Description Of The Operation

22

Financial Ratio Analysis

25

Investor Relations In 2008

28

Financial Operations

29

The Repercussions Of The Acquisitions: The Share Price

29

Short Term Pro’s And Con’s

31

A Longer Range Perspective

32

What Was Expected And What Really Happened

34

How DRST Is Performing Today

35

Conclusions

36

Bibliography

37

2

The Defence Industry

The defence industry is a major industrial sector, generating innovation and centred on highend engineering and technologies. Its research has created important knock-on effects in other sectors, such as space, electronics and civil aviation. Many of what have become everyday technologies in use were born in defence industry: microwave technology, satellite navigation and event the internet can trace their origin back to research carried out by defence industry. There are also many examples of technologies invented in the civilian sector, which were nurtured in the military sector, such as jet engine propulsion and integrated circuits. The defence sector has three main sub-sectors:

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The aeronautics

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The land defence sector

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The naval sector

Besides the three main sectors, other segments can be distinguished such as for example defence electronics and missiles.
Before analyse the defence industry in 2008, is relevant study how the defence industrial landscape arrived at its current state. Examining most studies of the defence industry, the prominent themes we encountered are consolidation, globalization, and commercial-military integration.1

CONSOLIDATION
Defence industrial consolidation refers to an on going process of mergers and acquisitions that have transformed the defence industrial landscape. As Jeffrey Bialos, a former Deputy Under Secretary of Defence for Industrial Affairs, has pointed out, “What were 33 separate...


Bibliography: 2 Remarks of Jeffrey P. Bialos, Deputy Under Secretary of Defense for Industrial Affairs, Credit
Suisse First Boston Aerospace Finance Executive Symposium, April 27, 2000.
TABLE 1 U.S. Contractor Presence for Selected Military Platforms (1990–2000)3
The 50% of the mergers involving publicly traded acquirers in the defence industry between
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