Leonardo DRS' first acquisition marks next phase of company's growth

Leonardo DRS' first acquisition marks next phase of company's growth

Defense News

March 7, 2017 -- Washington  Leonardo DRS, the U.S. subsidiary of the Italian defense contractor Leonardo, announced its first acquisition Tuesday morning. But the $150 million purchase of laser technology firm Daylight Solutions most likely won’t be the last, the Leonardo DRS head said.

Revenues at Leonardo DRS have been growing “in the mid-single digits” since the drawdown in Afghanistan, and now the company wants to begin conducting targeted acquisitions to help further its expansion, its CEO Bill Lynn said in an exclusive interview with Defense News Tuesday morning. 

DRS plans to seek out technology companies that can strengthen its position in each of its focus areas, which include electro-optical and infrared sensing, computing, naval electronics and propulsion, satellite communications and ground-based and airborne sustainment. 

“If we do [additional] acquisitions, it almost surely will be in one of those [areas], but which one would depend on what kind of opportunities present themselves,” Lynn said. “We think we can grow all of them. We would use targeted acquisitions to leverage that growth, and it could be in any of those areas.” 

Lynn said he doesn’t expect DRS to purchase any other companies this year. Instead, the company will focus on integrating Daylight Solutions with its current product lines. 

Daylight Solutions, a San Diego-based company established in 2005, creates “quantum cascade laser products” that are already being adopted in defense products such as Northrop Grumman’s Common Infrared Countermeasures system. It has also marketed an infrared pointer and beacon to the military market. 

DRS’s acquisition of Daylight Solutions will allow both companies to benefit from each other’s technologies, Lynn said. For instance, in the area of aircraft survivability, DRS's electro-optical/infrared sensors could be coupled with Daylight Solutions’ laser systems to counter heat-seeking weapons. Other applications include thermal illumination, combat identification, and standoff detection. 

“We think it’s a terrific company. They have cutting-edge technology in lasers that is going to help us across the board,” he said. “What it’s going to do is fortify that electro-optical infrared space that we’re in, and we’re one of the couple of leading companies already in that space. 

“This gives us a much broader toolkit and expands us into the laser world, where we had some position, but it really puts us into a much stronger position.” 

Beyond the defense sector, DRS could leverage Daylight Solutions’ technologies in the commercial sector, including for cancer diagnostics and chemical detection, a news release stated. 

DRS plans to make Daylight Solutions a separate business unit, which Lynn said will make it easier for the company to incorporate those technologies among its different product lines. The laser firm also will retain its two cofounders, Timothy Day and Paul Larson, with one leading defense programs and the other working on technology development.   

In a statement, Day said the acquisition would improve Daylight Solutions’ ability to transition technologies into production and that the company would benefit from DRS’ “people and resources”