Page 98 - 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

The sales of Cobham and that of Ultra two years later to the same US fund, raised questions regarding
the need to assess the suitability, from both a CMA and national security perspective, of a prospective
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buyer of a UK defence company. Given the analysis conducted by Bain & Co it is unlikely that a private
equity firm, generally attracted to a deal by the prospect of arbitrage, would qualify. However, this
point was made very clearly (without access to Bain & Company’s 2024 Private Equity Report) to the
CMA in the evidence submitted by a “third party”.
“… Advent’s status as a private equity investor means that it is not a suitable owner for Cobham’s
air-to-air refuelling business, because:
“(i) Advent has no history of owning defence businesses, and has a history of acquiring businesses
with an objective of exiting them quickly, and potentially breaking them up;
“(ii) Advent is unlikely to make the required long-term investments into required technology,
equipment, and research and development, in order to support, maintain and upgrade the air-to-
air refuelling business.”
AI Convoy Bidco - Cobham: A report to the Secretary of State for Business, Energy & Industrial
Strategy on the anticipated acquisition by Al Convoy Bidco Limited of Cobham Plc: Competition &
Markets Authority; 29 October, 2019)
When Andrea Leadsome, the Secretary of State for Business, Energy & Industrial Strategy looked at
the CMA assessment, she was just over two months into her six-month stint (between 24 July 2019
until 13 February, 2020) in office. She did not find these arguments persuasive and approved the
transaction.
She had, however, received some guidance beforehand, in the form of a quoted “UK Government
spokesman” who announced that “This is a commercial matter for the companies involved”. However,
having made that statement, the government subsequently requested that the CMA should review
the proposed transaction citing national security concerns.

“Just before 10pm on a Friday (just before Christmas) is an odd time for this kind of thing to be
announced. One defence analyst remarked that it was as if the government rather wanted no-one
to notice what had happened.
“It says something of the sensitive nature of Cobham’s business that much of the published version
of the competition regulator’s (CMA) report on the takeover was simply blacked out. In one
unedited passage of the report, the Ministry of Defence said if the deal went ahead there was “a
risk that the institutional framework and safeguards required by the government’s security
framework may be undermined”.”
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(Dominic O’Connell, BBC News Business Correspondent 21 December, 2019)
Could the MoD have predicted or anticipated Cobham’s vulnerability to a private company takeover?
If so, what steps could it have taken to improve the outcome in the national interest? What other
agencies could or should have been involved in any intervention?

Bankers, investors, equity analysts, financial advisers, industry regulators, customers, suppliers and
other stakeholders routinely look for early signs of corporate failure in business. By reviewing
information in the public domain, they can combine analysis of both qualitative and quantitative data
to assess the company’s health. In particular to detect any symptoms of potential failure: from
refinancing, restructuring or forced sale to bankruptcy. The manner of Cobham’s sale and subsequent
break-up has been widely regarded as corporate failure and the signs were evident as far back as 2008,
when Goldman Sachs published its buyout model. Frequent changes in the leadership team led to
discontinuity and inconsistency in decision-making, policy and oversight.
The major benefit provided by actively monitoring the management and performance of major
government contractors like Cobham is that it provides early warning of potential problems, creating
an opportunity for intervention and either preventative or mitigating action. Defining the nature of
intervention can be challenging but engaging with the supplier regarding the concerns is a useful place
to start. The US DoD has developed a model based on its accumulated experience of informal
direction.

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07/07/2025 Richard Hooke 2025