Formed in 1997 by the purchase of several former Lockheed Martin businesses, L-3 Communications has become one of the fastest-growing US defence companies, and one with an appetite for acquisitions. In March L-3 completed its largest and most significant acquisition to date, buying Raytheon's Aircraft Integration Systems (AIS) business – a leader in special-mission aircraft modification – for $1.13 billion. As a result, L-3 comes to Farnborough 2002 not only bigger, but more ambitious, chairman and chief executive Frank Lanza tells Graham Warwick.





Q: AIS is your biggest acquisition yet. What does it do for L-3?

A: L-3 does not build aircraft or missiles. We needed some way to integrate our products for major customers who do not just want to buy products. AIS allows us to step up as prime contractor, not on weapons or combat aircraft, but in intelligence, surveillance and reconnaissance, where there is no real prime in the USA, no real integrator.

Q: Is L-3 benefiting from the build-up in US defence spending?

A: The US defence market is robust. The 2003 budget will be $130 billion; that's a big upturn. There is an emphasis on transformation, on intelligence, surveillance, reconnaissance and communications, which is to our advantage. But there still has to be modernisation of legacy platforms, so it's a win-win for us.

Q: What about L-3's involvement in homeland security?

A: L-3 is a big player in airport security. We have 300 explosive detection system machines under contract to deliver by year-end, and that could go up by as much as 500. In future years, there will be the need to scan carry-on bags as well.

Q: Will L-3 keep on growing by acquisition?

A: We had planned to grow 10% a year through acquisitions, but we're running at 20% – including indigenous growth, that's 30% a year. It's a good time to grow, to take advantage of acquisitions. I like businesses in the $50-300 million range, but if a bigger one comes along we can take a chance

Q: Are you looking internationally for acquisitions?

A: We are looking at companies overseas, to partner with or to buy. We have companies in Germany and Ireland, but I would like to be in the UK – it's a great market because of the synergies with the USA. In France and Germany, it is better to partner and we have partnered with EADS and Thales.

Q: Could L-3 itself become the target of a take-over?

A: If L-3 was to become an acquisition target it would be from an international company like BAE or Thales. They are products people like us.

Q: How to you manage a company as diverse as L-3?

A: We let the companies we buy keep their autonomy. We centralise marketing, coordinate research and development and give them political help. But we do not micro-manage. We run each business as a core business – AIS was not big within Raytheon, but to L-3 it is an engine.

Q: What is next for L-3?

A: On balance, I like our position, our products – the broader you are in products, the better your are. Our most recent acquisitions have been in vertical niches such as secure communications and missile defence. AIS was a horizontal move.

Now we need to add on to AIS some upfront requirements analysis capability – sort of an aL-Works'.

Source: Flight Daily News