In just over a decade, L-3 Communications has grown from an annual turnover of around $700 million to more than $14 billion. Now chief executive Michael Strianese is looking for additional expansion, but with greater emphasis on organic growth.
More than half of L-3’s revenues are from aviation-related activities, and Strianese says: “The growth model is changing to hone in on those areas that we see continued growth, and establishing even more capability.”
L-3 this year acquired Northrop Grumman’s Electro-Optical Systems (EOS) unit for $175m, expanding its EO/IR activities, where it had previously acquired Wescam, to an $800m business delivering double-digit growth.
Strianese joined L-3 at in 1997 as finance VP, rising to chief executive following the death of Frank Lanza in 2006. Two years on, he says L-3 is “a much broader, integrated company focused on capability and the international marketplace,” and no longer operates on a “fragmented business-by-business case”.
The company’s crowning aerospace achievement came last year, when it won the US Joint Cargo Aircraft project, teamed with Alenia Aeronautica. The army’s first C-27J Spartan recently flew in Italy and should be delivered late this year.
In the subcontractor role, L-3 will be communications system integrator for the US Navy’s Broad Area Maritime Surveillance fleet of modified Northrop RQ-4 Global Hawk UAVs. The companies have also teamed for the navy’s EPX intelligence aircraft requirement, and for the US Army’s revived Airborne Common Sensor project.
On the international stage, L-3 established a UK presence early this decade, also making local acquisitions, largely in the ISR arena. The company is mission systems integrator on the Raytheon Systems-led Airborne Standoff Radar programme, and will provide EO/IR sensors for British Army/Royal Navy AgustaWestland Future Lynx helicopters. It was also selected this year to deliver the Helix mission system upgrade to the RAF’s BAE Systems Nimrod R1 electronic intelligence aircraft.
International success is contributing towards L-3’s current organic growth of around 7-9% a year, but the company continues to look for “very carefully chosen acquisitions”, says Strianese. “L-3 is engaged in several potential deals comparable with its recent purchase of Northrop’s EOS business. “I would predict that we would have at least one, perhaps two more this year in that size range.”
Bigger purchases are “long shots for now”, though he notes: “If a larger deal were to present itself we have the financing flexibility to do that as well. But we have to buy companies at a price that produces real economic returns. There is no ‘must-have’ for us anymore: we’re very selective.”
Source: Flight International
