The company aims to become a comprehensive solutions provider by integrating ESG’s software engineering and systems integration capabilities

The HENSOLDT Group (“HENSOLDT”) has acquired ESG Elektroniksystem- und Logistik-GmbH (“ESG”) to become a comprehensive solutions provider by integrating ESG’s software engineering and systems integration capabilities. The acquisition is expected to be completed in the first half of 2024, subject to obtaining the necessary regulatory approvals.

ESG is a leading platform-independent system integrator and established technology and innovation partner for defence and security. It develops, integrates, supports and operates highly complex, security-related electronic and IT systems for defence and security for armies, companies and authorities in different countries. The company plays a crucial role in major programs such as FCAS (“Future Combat Air System”) and F-35. ESG employs 1,380 people in Germany, the Netherlands and the US. For 2023, its revenue is expected to be approximately €330 million.

By adding ESG’s solution portfolio, HENSOLDT aims to combine knowledge of customer viewpoint (“Concept of Operations”), certifications and engineering know-how to develop more innovative solutions in a faster way, in particular, the digitalisation of the battlefield and development of integrated network solutions for multi-domain operations. Examples include ground-based Air defence, signals intelligence, command and control, and enhanced solution capabilities in various airborne and naval campaigns. In addition, the acquisition will create new opportunities in platform lifecycle services.

According to Thomas Müller, HENSOLDT Group CEO, “The acquisition of ESG is an excellent fit with our overall strategy and accelerates HENSOLDT’s development as a solution provider for defence and security. By combining highly complementary capabilities from HENSOLDT and ESG, we are taking a decisive step towards becoming a leading European provider of seamlessly integrated solutions. This will put us in an ideal position to meet the existing and future requirements of our customers around the world.”

Christian Ladurner, CFO of the HENSOLDT Group, said: “The acquisition of ESG is an excellent opportunity to take our business to the next level. ESG exhibits strong growth and cash conversion, given its capex-light business model. We have identified significant cost and revenue synergies which will drive attractive value creation while maintaining our discipline in capital allocation and net leverage.”

The group is acquiring ESG from an investment vehicle managed by Armira Beteiligungen GmbH & Co. KG (“Armira”) for an enterprise value of  €675 million plus an earn-out of up to  €55 million.

HENSOLDT expects to generate €19 million run rate annual cost synergies in addition to revenue synergies from cross-selling and combined positioning for future pipeline opportunities.