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Technology solutions provider Aurizn has announced it will potentially scoop $30 million–$50 million worth of acquisitions over the next 12 months as it capitalises on Australia’s domestic defence industry “withering on the vine” due to a lack of defence funding.
Aurizn, a merger of software engineering enterprises elmTEK and Consilium Technology, is funded by private investment group Pemba Capital Partners. The company has already announced acquisition of Pacific Aerospace Consulting Australia late last year.
Aurizn has also announced intentions to offer more “consolidated speed-to-capability defence packages” to the Australian government as a tier two defence technology business below the traditional defence primes.
Aurizn chief growth officer Anthony Ward said the company is winding up for strategic acquisitions, specifically in Australia but also in the US.
“We’re looking to drive some industry consolidation, which we think is important. It’s important to position, particularly with the changes of post-Defence Strategic Review, that the world has changed for companies trying to bid for Defence contracts,” Ward said, who previously led Defence bidding for Asia-Pacific at Serco.
“There’s a lot of companies involved in the defence ecosystem in Australia, particularly around the technology and engineering space … We feel that the time has come, probably to consolidate some of those businesses and bring them in under a larger, more prominent brand.
“Post the DSR you’re needing to be quite strategic about the services that you provide to [the Department of] Defence and the ways in order to win contracts from Defence, either directly or through a prime ... Rather than series of small or medium-sized projects, you’re now seeing much larger super projects that are needing suppliers to have greater horsepower to deliver those contracts.
“(There are) some really good technology and engineering solutions that have been developed in Australia for defence that just aren’t seeing the light of day. So bringing them up in under our wing, you know, combining them with an established market presence that we already have, perhaps filling any gaps in the armoury that we have around the services that we provide.”
Aurizn has previously shown significant interest in solutions involving digital test and evaluation, simulation, artificial intelligence to enhance decision making, advanced sensing technologies and cyber operations.
“You are seeing decisions taken by the current government starting to really flow through the defence industry. It’s directly affecting large primes, but all the way down to small SMEs that have traditionally operated and had reasonable market position in the Australian industry.
“With the Albanese government’s strategy around defence and defence spending and these larger focuses on larger programs such as AUKUS such as GWEO (Australian Guided Weapons and Explosive Ordnance), we are seeing a fundamental shift in the industry.
“We are seeing businesses that are really, really struggling, particularly in the defence sector … We believe that we’ve got the scale and capability to cut through some of the challenges that other businesses currently have ... We have to really understand the large programs of work, how they’re being funded, how they’re going to be delivered, and we need to make sure we’ve got that seat at the table.
“A small to medium enterprise that doesn’t have our size, scale capability and balance sheet and backing of somebody like Pemba (Capital Partners) is absolutely right now doing it significantly tough in the defence industry … You can see that defence companies are sort of withering on the vine if they’re smaller operations.
“Through our crystal ball lenses, we probably see more of the same occurring … We are working on the premise that there is no significant change in government or government policy.
“Talking with our CEO and our chair of our board this morning, and in fact there is no limit to the check sizes that we can write. That’s where Pemba sits with $2 billion fund under management.
“If we saw an acquisition that was big, lofty, and we thought it really provided strategic advantage, there’s no significant impediment for us to chase that. Now, that doesn’t mean we’re going to go and buy Boeing, but it means that if there was a larger SME in the Australian defence sector, we would absolutely be looking or have looked at them. Because if there is more of the same, if policy doesn’t change, then you’re not going to see funds being unlocked for the wider defence industry.”
Ward also confirmed that the company would be using a “buy and build” approach to acquisition management.
“Those people will come with us, and that’s very much how Pemba’s buy and build model works,” he said.
“Normal private equity will just go and buy something, swallow it up, integrate it and strip it basically of all of its history. We’re not doing that, but what we are doing is integrating that under our combined rise in brand and go to market going forward.
“Pemba very much backs founders of businesses and says, ‘Right, how can we help you to grow and develop your business?’, rather than buying an underlying business and then discarding management, founders.”
