Aircraft

Israel special - Elbit's international footprint

A wave of acquisitions has seen privately owned Elbit Systems not only more than double in size in four years but reinforce its status as the country's only defence contractor with a genuinely international footprint. "We're a multi-domestic company," says chief executive Joseph Ackerman, echoing the description used by Thales, its partner on the UK Watchkeeper unmanned air surveillance system, of its international network.

Although Elbit makes over 70% of its almost $2 billion revenues from overseas customers - a similar proportion to Israel Aerospace Industries - it has been quicker than its state-owned rival to establish a foreign manufacturing and design base with 13 subsidiaries in Asia, Europe and North America. These include EFW, Kollsman and Rockwell Collins joint venture Vision Systems International in the USA, and Ferranti Technologies and its U-Tacs joint venture with Thales in the UK.

Consolidation

The company has also been involved in the beginnings of what many feel is a long-overdue consolidation of Israel's domestic defence industry, following its takeover of electro-optical systems specialist Elop in 2000 and its purchase in 2006 of Tadiran Communications and 70% stake in privately held electronic warfare company Elisra (IAI holds the remainder).

Ackerman: responsibilities to Israel too "We invest twice what companies in the USA and Europe spend on unfunded research and development" Joseph ackerman Elbit chief executive

Now, after acquiring "most of the defence private sector in Israel", Ackerman has his sights set on a bigger merger - with one or both of the state-owned defence giants Israel Military Industries and Rafael. "If the government agreed, certainly we would be interested," he says. But he would only want the parts that fit into Elbit's portfolio of products, from cockpit avionics through unmanned air vehicles to helmet displays and surveillance equipment. Within three years, Israel, he says, needs "two strong defence companies" - Elbit and IAI - able to compete on the world stage.

An even more radical step would be a coming together of the two companies' UAV activities, something Ackerman says the government would support so long as Elbit and IAI came up with a mutually acceptable proposal. Separately, two of the biggest names in unmanned systems in the industry, their product lines are largely complementary and a merger would create a market leader, he believes.

Elbit's growth has not all been about acquisition. Existing businesses have contributed. "Half our growth has been organic," says Ackerman. Like other Israeli companies he is proud of Elbit's record in research and development, with up to 9% of revenues being pumped back into creating new products. "We invest twice what companies in the USA and Europe spend on unfunded R&D," he says. Europe, in particular, has seen a surge of activity. Five years ago, the region represented just 5% of the company's revenues. Now it is almost four times that. Programmes such as Watchkeeper - based on Elbit's Hermes 450 unmanned platform - have been crucial.

Despite its multi-domestic focus, Elbit takes its "responsibilities" as an Israeli defence contractor seriously. "We contribute to the security of our small country and also to its economy," says Ackerman. The company has its headquarters, a quarter of its 8,000 workforce and much of its manufacturing activity not in bustling Tel Aviv but in Haifa in the poorer and sparsely populated north of the country. "We have sites all over Israel where there is high unemployment," he says.

With a backlog of $4.5 billion and the company highly profitable, Ackerman feels Elbit is on a financially sound footing. well equipped to compete for ever more sophisticated contracts. "No other company has the spread of technologies we have," he says. "The only major technology we have missing is radar, and it was our decision not to go into that. Today, we can supply turnkey solutions, systems of systems, that we could not 10 years ago. All our contracts now utilise more than one technology."

Could Elbit's UAV activities - which includes its Hermes range - end up merged with IAI's?