BAE execs explain the thinking behind their latest acquisition

By: Mark Pomerleau

In late January, Arlington, Virginia-based BAE Systems Inc. announced two acquisitions to bolster its electronic systems sector, a move that reflected a combined investment of $2.2 billion.

The purchase included $1.9 billion for Collins Aerospace's GPS receivers business and $275 million for Raytheon's tactical airborne radios.

Company leaders saw an opportunity. GPS receivers could provide secure and resilient position data that would help precision-guided munitions become more accurate. Airborne tactical radios, typically installed on rotary, fixed-wing aircraft and drones, would create a new business for BAE's electronic systems sector.

The properties became available because of a proposed merger between United Technologies and Raytheon, and BAE's two top executives said they see the purchase as a way to more closely hew their businesses toward the Pentagon's long-term needs. Specifically, they point to the 2018 National Defense Strategy. A closing is dependent on the Raytheon-United Technologies merger and is expected in the first half of 2020.

C4ISRNET's Mark Pomerleau spoke recently with Jerry DeMuro, BAE's chief executive, and Tom Arseneault, company president and chief operating officer, about the thinking behind the investment.

C4ISRNET: How do you see these acquisitions fitting into BAE overall? What opportunities could this create?

Jerry DeMuro: As we look at the National Defense Strategy and we look at the service modernization priorities and where we think customers are headed in our core markets, we think that these two businesses are very relevant. We have capabilities in those areas that these properties complement very well.

Both of them happen to be very mature, well-established, strong technology-based businesses that are on the cusp of significant growth because of the relevance to the service priorities.

[It's a] unique opportunity [that] only came about because of the UTC-Raytheon merger. We were very pleased to see it [and we were] opportunistic in going after them.

Tom Arseneault: Precision and autonomy are two key things that run through the Defense Strategy and priorities in the services and the technologies that [Under Secretary of Defense for Research and Engineering] Dr. [Mike] Griffin talks about.

With autonomy, you need to know where you are. Position data is important. Secure, resilient position information. Military GPS is a critical underlying technology. With Collins, you've got a company that's been doing this for 40-plus years and a million and a half of these devices are out there going to M-Code [a new military signal used for GPS]. Autonomy, ditto. You need to know where you are ... certainly with precision-guided munitions.

You're also relying on secure communications. You need to know where you are, and you need to be able to communicate with the systems around you.

C4ISRNET: How do you see these new businesses complementing what you already have and allowing you to pursue contracts that you couldn't before?

DeMuro: We've been working for a number of years now — most people don't know — but we have a precision-guided munitions business.

We provide the seekers for the THAAD [Terminal High-Altitude Area Defense]; we provide all the smarts in terms of combining EW, precision locating and navigating in the LRASM [Long-Range Anti-

Ship] missile. We just won the [Precision Guidance Kit] contract — precision-guided mortar. We are also the provider of the high-velocity projectile and putting these kinds of capabilities in there.

It's a great fit for that business, but also in many of the other things that we produce. Combining this kind of capability gives us a whole new market that we can bring their capabilities to.

And the same thing applies in the radio world, software-defined radios. We can take some of those waveforms and incorporate them in devices that we have today in our C4ISR portfolio.

It's not about cost synergies; it's really about market synergies in those places where we're headed already.

C4ISRNET: Obviously, some of those capabilities, such as THAAD, are dependent on a lot of disparate systems. Does this acquisition help BAE become more interoperable with a lot of other systems?

DeMuro: Think about a product that we make today, the Link 16 [military tactical data link network].

Arseneault: We own the Link 16 waveform as part of the fundamental portfolio of our current communications business. Now we'll be able to add that family of waveforms, we'll be able to use it on these acquired radios and then vice versa.

There's a number of waveforms — software-defined radio waveforms — that come with this portfolio, that we will be able to then market out through our existing communication devices.

THAAD was more on the precision side. While THAAD, itself, is a seeker of a type, I think this is more applicable to some of the new next-generation seekers that will want to be multimodal. So it's [electro-optical/infrared], it'll be radio frequency and GPS.

[We want to] have as many opportunities to get a really good sense of what's driving precision. With a million-and-a-half devices out there, there is a whole wide set of customers that these will continue to supply.

But this will also be a good opportunity for us to incorporate that technology into some of our roadmaps. SECTR [Seeker Cost Transformation] is a DARPA program, a next-generation multimodal seeker. So, GPS will be a piece of that. The idea being where seekers are more modular and so you can use a seeker on multiple weapon types and reduce costs and have greater efficiency.

C4ISRNET: Are you thinking of a card you can plug in? Or more software adaptable?

DeMuro: Chip sets, right. Combined functionality ... because it's all about size, weight and power and cost as you get out there. But the presence of these two product families, and what has to happen to upgrade them in and of itself, supports the business case. We didn't really include a lot of synergies in the business case, but we see some real opportunity there.

C4ISRNET: Can you expand on the autonomy side? I see how the GPS, and linking GPS to radio, can lead to greater precision, but where do you see opportunities on the autonomy side?

Arseneault: Autonomous systems need to know where they are. Secure, resilient position information is critical ...

DeMuro: Anti-spoofing.

Arseneault: These sorts of devices are going to find their way into many if not all of the modern autonomous systems.

Likewise, you need to be able to communicate with things around you. As we're headed to swarms, they want to know where they are. They want to know where all of their surrounding platforms are. Manned-unmanned teaming is another version of autonomy where you want to know, and you want to be able to communicate with your wingman as they call it.

DeMuro: If you think about anti-access/aerial denial, doing all of this in a contested environment — it's got to be secure. M-Code is absolutely essential to that.

These waveforms, low probability of intercept, low probability of detection and also software-defined radios are very agile in moving around to enable that in contested environments. Both of these properties help accomplish that.

C4ISRNET: You mentioned the National Defense Strategy; what role do these non-kinetic capabilities play in future conflicts?

DeMuro: They're foundational. If you don't have them, you can't operate in the future environment.

https://www.c4isrnet.com/industry/2020/03/23/bae-execs-explain-the-thinking-behind-their-latest-acquisition