Page 75 - Five Forces of Americanisation Richard Hooke 04072025 final post SDR1

The UK Defence Industry in the 21 Century
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The Five Forces of Americanisation

In the meantime, should another UK listed defence company - BAE, Babcock, Chemring or Rolls-Royce
for example - attract bids from US acquirers in the future, a reference to the Competition & Markets
Authority or Cabinet Office is unlikely to deliver the most advantageous outcome for UK Defence. By
that stage, the “grooming for sale” has been completed, the parties have all but agreed the deal, the
financing is in place, the compensation, the fees, bonuses, paintings in the boardroom, the deposed
leader’s next job: all have been worked out.
That kind of momentum is difficult to stop. Government requires the kind of advance warning that
persistent contractor oversight and monitoring can deliver.

And one should not consider any asset immune from arbitrage. A German submarine manufacturer
may seem an unlikely target but, in June, 2002, US-based Bank One's private equity arm, One Equity
Partners, acquired a 75% stake in German submarine manufacturer Howaldtswerke-Deutsche-
Werft (“HDW”) from Babcock Borsig.
We need also consider that this US administration is very accomplished in the world of mergers and
acquisitions: including defence. With newly-appointed Deputy Secretary of State for Defense and co-
founder of US private investment firm Cerberus Capital Management, Steve Feinberg added to the
President’s team, experience includes his former firm’s ownership of Dyncorp International, from
2010 until its sale to NYSE-listed Amentum, in 2020. DynCorp operated right at defence’s “sharp end”,
operating in a variety of countries around the world: in Iraq, Afghanistan, Colombia, Somalia, and
other conflict-affected regions. The company provided logistics support and security, as well as
training local allied forces. More recently, (see Appendix 3), Cerberus acquired Ultra Electronics’
former anti-submarine underwater systems joint venture partner, Sparton Corporation of the USA, in
2019, selling it to Elbit Systems of Israel two years later. These are just two of several critical defence
businesses that have featured in Cerberus’ portfolio over the last decade.
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Notes

1. In the summer of 2002, BAE CEO Mike Turner called me to ensure that the MoD retained my firm, PwC, as
adviser on its investigation into cost overruns on the Nimrod Maritime Patrol aircraft and the Astute class
attack submarine programmes. He felt that I knew the business and would understand the complexity of
the issues, aware that the Company would collapse if it was found that BAE was liable for the substantial
financial penalties demanded by the then Chief of Defence Procurement, Sir Rob Walmsley. Mike was
adamant that he would allow BAE to fail if the MoD continued to pursue its current course.
There were several reasons, mostly informed by business logic, why I believed he was sincere. (Ultimately,
new contractual terms were agreed in February, 2003 and the project restructured, with BAE setting aside
provisions in excess of £1m. As a matter of formality, I recused myself from any involvement in the PwC
engagement.)
2. According to the Spencer Stuart Board Index, 2024, “UK boards respond to accelerating change
and complexity”. However, counter-intuitively, it also reports that “31% of CEOs in the top 150 FTSE
companies now sit on an outside board, up from 27% in 2023”.
Information on board vacancies (“access board vacancies others can’t”), like the following circular from
David Schwarz, Board Appointments UK, can be received by paid subscription, together with training, CV-
writing and networking services, as required.

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07/07/2025 Richard Hooke 2025