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Most corporate mergers and acquisitions fail. Measured over 5 years, with the defining criterion as financial results, the failure rate is between 50-75% in most studies. A recent BAE OMC release, however, indicates that BAE may have made a solid move. The larger trend toward blast-resistant vehicles is clear, and the release even misses some important BAE wins.
Johan Steyn, managing director of BAE Systems Land Systems South Africa:
“Since BAE Systems purchased a major share in the company in 2004, Land Systems South Africa’s annual turnover has quadrupled from 300 million Rand to over R 1.2 billion in 2006. BAE Systems has reinvested the profits into the South African business, enabling it to take on more export work.”
That has been timely, given American orders for 424 RG-31 vehicles over the past couple of years, Sweden’s orders for 200 RG-32M vehicles in 2005-2006, and Canada’s order for up to 75 RG-31s in 2006. Recent American advance MRAP orders have included 20 RG-31s, and also 90 of the new RG-33s developed with the assistance of BAE OMC expertise: 15 RG-33 patrol vehicles, and 75 of the larger RG-33L version with robotic arms. A full MRAP contract win could boost those numbers significantly.
As a result, since the acquisition Land Systems South Africa has improved its supply chain, expanded its under-roof factory space at the Benoni plant by 20%, upgraded other facilities, installed new machines at its Gear Ratio plant in Alrode, and created about 200 jobs. BAE Systems has also been a winner, by incorporating a significant pool of design expertise just as that expertise began to have greater global value. See release.
See “Taking the Myth Out of M&As” for some analytical insight behind mergers & acquisitions, and the kinds of criteria used to sift real competitive opportunities from superficially attractive acquisitions.