British defence business faces wave of international takeovers as predators circle, City professional warns

The proposed acquisition of engineering group Senior could herald a fresh wave of takeovers of British defence firms – fuelling fears that the industry is being hollowed out at a time of global conflict.

The board of aerospace and defence supplier Senior this week backed a joint £1.4billion offer from US investment firms Tinicum and Blackstone, paving the way for it to fall into foreign hands.

Experts in the City are now warning that this deal sets the scene for further swoops on UK defence firms.

Patrick Sarch, a mergers and acquisitions expert at law firm White & Case, said: ‘With governments ramping up defence spending, we expect to see this trend accelerate as international bidders, particularly from the US, continue to be drawn to the UK market and its world-class defence businesses, which have deep management talent and technological expertise, are global with geographically diversified revenues, and are undervalued relatively.

‘As a result, we anticipate overall deal values increasing significantly in coming months, alongside more transformational mergers and acquisitions and bigger public-to-private transactions.’

This could become a major headache for ministers already under pressure to increase military spending and bolster Britain’s armed forces.

Takeover target: The board of aerospace and defence supplier Senior this week backed a joint £1.4bn offer from US investment firms Tinicum and Blackstone

A host of British defence companies have fallen into foreign hands in recent years, including Cobham, Inmarsat, Meggitt and Ultra Electronics. 

Explosives and counter-measures specialist Chemring successfully fought off takeover interest last year.

But other recent deals to have gone through include the takeovers of Spectris and Spirent Communications – both of which have defence clients.

A flurry of activity could force the Government to step in under the National Security and Investment Act 2021, which gives ministers the power to block deals.

Sarch commented: ‘Takeovers of defence-related businesses can present obvious concerns about overseas ownership, directly or indirectly.

‘Historically, scrutiny tended to focus on a limited number of jurisdictions, but in a more volatile geopolitical environment that position is becoming increasingly fluid and less predictable.’