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PARIS AIRSHOW — The last year was a dramatic one for Leonardo DRS, as the American arm of Italian giant Leonardo reshaped its portfolio and went public.
It’s the kind of move that could make a CEO of 11 years think about heading for the beach. But Bill Lynn, the former deputy secretary of defense who leads the company, says that’s not in the cards.
“It’s not going to be soon,” Lynn told Breaking Defense during the Paris Air Show when asked about his exit plan. “You know, this public step is a big one. It’s an important one, it takes some building and some process. So I want to get that solidified now. I think [I’ll be around for] several years, and I’m not putting a number beyond that. But I plan to be here for a while.”
Over the last year, Lynn has overseen a major reworking on DRS’s portfolio. The central move was the decision to buy Israeli radar firm RADA and then sell off Leonardo’s satellite communication portfolio — which Lynn says was still profitable, but simply didn’t fit with the new vision for the firm. The company is now focused on its core four areas: advanced sensing, network computing, force protection, and electrical power conversion and propulsion.
The RADA move not only gave Leonardo a radar segment it needed to round out Lynn’s strategic plan, but it allowed the company to execute a reverse-IPO and quickly get on the stock market without needing to spend money.
“Leonardo wanted us to go public. And the first way you do that, is you’d sell the stock and sell 20 percent of the stock and get $500 million, and that would go to Leonardo,” he explained. “Instead of doing that, what we’ve done is sold the satellite communications business, got $500 million, took that 20 percent of the stock, gave that to the RADA shareholders and in exchange for their stock, they got shares of our stock.
“And then that led us to then a listing on NASDAQ — we assumed their [RADA’s] listing — that’s what a reverse merger is. And so we were able to go public without the pain of an IPO. It’s much less costly, much less risky, we just turn the switch and [we’re] public.”
While obviously open to the idea of growth, Lynn stressed that he views the company’s sweet spot where it is now.
“We like being a mid-tier,” Lynn said. “We think we’re well suited in the mid-tier weight class. And we think what it does for us is that it allows us to choose our markets.
“One of the things that data will show you is that those four core markets are growing faster than the defense investment budget as a whole,” Lynn said. “Which means that we’re going to go faster than the market. We don’t have to take [market] share from people to grow. And that’s a nice story to investors is that if we just hold serve, we will grow faster than the market.”
As a result, Lynn said the company isn’t looking for merger and acquisition efforts, although he said DRS is open to the idea if something unique comes along. He also said there is no pressure from shareholders to grow through M&A.
“M&A for us is about capability. It’s not about scale. And so, we’re not — we don’t have a rhythm where we need to do an acquisition,” he said.
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