SYS’ Latest Strategic Move: Acquisition Process of AEI Systems Complete

Samsun Yurt Savunma (SYS) makes its plans regarding its product families by considering the demands from end-users, provided added value, and competition, and through a corporate strategy development processes. The company took a critical step forward by acquiring United Kingdom based AEI Systems, achieving various aims such as “becoming a medium-caliber weapon producer” and “having a UK-based subsidiary”.


AEI Systems, a company that is working on medium caliber cannons with a focus on 30x113 mm and 20x102 mm calibers, became a subsidiary of SYS after 80 percent of its shares were acquired by SYS. The formal process of acquisition concluded on 15 January 2023.

 

Coinciding Interests

SYS proved that it has been planning its product families with a strategic outlook by skipping 5.56 mm and 7.62 mm calibers and going straight to 12.7 mm heavy machine guns from 9 mm pistols. SYS developed CANiK M2 QCB heavy machine gun in line of its vision of becoming the best in its class, and made its vision a reality with the successes in the Turkish and foreign markets, along with the qualification process of the gun.

A similar vision and coinciding interests resulted in SYS purchasing the majority share of AEI Systems.

SYS completed its product family for small arms calibers with 12.7 mm CANiK M2 QCB. The company determined the medium caliber weapons market as a target in the tail end of 2010s. In this process, the company established its subsidiary UNIDEF in 2013, to run weapon integration projects, and another subsidiary, UNIROBOTICS, in 2020, to provide software, hardware and mechatronic engineering solutions for weapon integration. As such, SYS became a company that completed its small arms product range and that developed its weapon integration capabilities, a crucial concept for medium caliber weapons.

AEI Systems slowly became ready for acquisition in this process. AEI Systems is a historied company, and its previous products still serve in many British-made air and sea platforms. These air and sea platforms are used in British Armed Forces as well as India, New Zealand, Australia, and various countries in the Arabian Peninsula.

On the other hand, the fact that AEI Systems’ current products not being integrated into turret solutions and the existence of a competitor like BAE Systems in the UK have made AEI Systems fade into the background, and its acquisition process started with this reality. In other words, AEI Systems awaited its eventual acquisitor as a company with a large yet unnoticed potential.

UNIDEF became the Turkish distributor of AEI Systems’ products and started offering them for the needs of the country. The main reasons these products did not see much success were that these weapons not having been integrated into a weapon system and the fact that a solution like this have not been qualified before.

 

A Process Accelerated by a Question

Acquisition process started in 2019, with a question by Simon Angel and Paul Knott from AEI Systems, asking why SYS, with its presence in the 12.7 mm heavy machine gun project and its aims to advance into larger caliber weapons, is not thinking about acquiring AEI Systems. This question catalyzed the business ideas SYS was forming to advance towards acquiring AEI Systems.

In early 2020, this question surfaced up once more and SYS started market research on the products AEI Systems offers. This research showed that 30x113 mm cannon has a significant potential with capabilities to be a part of every single platform that may be built in the future.

SYS commenced the due diligence process in the last quarter of 2020, even though COVID-19 pandemic affected the process intensely. The first step was establishing a staff to exercise due diligence. In this process, support came from Selin Aral, the former lawyer of SYS and the wife of SYS General Manager C. Utku Aral, offered her help. With her guidance, SYS reached an agreement with Fieldfisher on 7 April 2021 and another agreement with PWC on 11 February 2022. Paksoy Law Offices, under the leadership of Elvan Aziz, was then appointed to lead the staff.

After the due diligence process was dutifully and diligently completed, SYS made an offer to acquire 80 percent of AEI Systems on 6 June 2022.

 

Permits Acquired

This offer was a milestone for the acquisition process, yet many procedures for a large and strategic acquisition process like this still needed to be completed. The last obstacle in the process was receiving a permit due to United Kingdom’s National Security and Investment Act (NSIA). SYS was able to receive this permit relatively quickly, in 4 months, on 12 December 2022. United Kingdom Ministry of Defence gave the green light to SYS acquiring 80 percent of AEI Systems.

As neither a sales contract could be signed nor shares could be transferred without a NSIA permit, the acquisition process officially concluded on 15 January 2023.

 

A Win-Win for All Parties

C. Utku Aral, General Manager of SYS, highlighted that SYS acquiring 80 percent of AEI systems is a win-win for Türkiye, United Kingdom, SYS, AEI Systems and SYS’ subsidiaries, basically a win-win for all parties: “We made our due diligence and analyzed the subject in every way all throughout the process, from the idea all the way to the contract signing. We presented our strategies and plans to achieve our strategic goals. We created a concept where all parties can provide added value. In the future, when our added value will be tangible, we are sure that our concept will be understood much more clearly.”

 

Targets Set for AEI Systems: $70 Million Annual Revenue After 5 Years

After this acquisition, AEI Systems joined the ranks of SYS’ subsidiaries. SYS also made a roadmap for AEI Systems. According to the roadmap, AEI Systems will continue to be a brand in medium caliber weapons, and its development and assembly activities in its UK based facilities. Its production activities, too, will continue in its ecosystem in the UK, as much as it can retain the usage of “Made in UK” expression.

The roadmap also includes the qualification and improvement processes of the existing 30x113 mm VENOM LR weapon system, and a percussion primed version of the system with the capability to fire American munitions will be developed. Modernization efforts will also be undertaken for the 20x102 mm cannon.

Aral shares their targets for AEI Systems as follows: “Our target is going above $70 million annual revenue for weapon sales after 5 years. Of course, as AEI Systems achieving these sales numbers will mean UNIDEF and UNIROBOTICS supporting these operations with selling turrets. In short, group companies will grow together in this process.”

 

SYS Takes Its First Step for Medium Caliber Cannons

SYS took its first step regarding medium caliber cannons by acquiring AEI Systems. A historied and productive company like AEI Systems joining SYS’ company group will contribute to the institutional knowledge of both SYS and UNIROBOTICS. SYS will gain expertise regarding the design of medium caliber weapons and provide a significant technological acquisition regarding industrialization of these weapons. UNIROBOTICS staff, thanks to extensive information on medium caliber weapons they will receive, will then be able to develop much more innovative and competitive turret and weapon integration solutions. The first result of these efforts will be UNIROBOTICS’ TRAKON 30 turrets equipped with 30x113 mm cannon.

 

One Weapon to Rule Them All

Aral highlighted the benefits of 30x113 mm cannons: “30x113 mm cannon can be integrated into all kinds of platforms and performs as a significant force multiplier thanks to its ability to fire high explosive rounds. We see plenty of projects within Turkish defense and aerospace industry only that could use a 30x113 mm cannon.” Aral lists these projects as follows:

·       4x4 tactical vehicles (A TRAKON 30 turret was integrated into Nurol Makina's EJDER YALÇIN platform.)

·       6x6 and 8x8 tactical wheeled armored vehicles

·       Main battle tanks (Certain American and European new generation tank concepts utilize a 30 mm cannon instead of a 12.7 mm heavy machine gun.)

·       Unmanned ground vehicles (HAVELSAN’s KAPGAN vehicle mounted a TRAKON 30 turret.)

·       Attack helicopters (APACHE and TIGER helicopters use a 30 mm cannon.)

·       Fighter aircraft (French Mirage series aircraft and RAFALE aircraft use 30 mm cannons.)

·       Unmanned aerial vehicles

·       Offshore patrol vessels

·       Unmanned surface vessels

 

SYS Enters British Market

United Kingdom is a country where small arms sales are banned and thus, SYS was not able to penetrate the British market with its CANiK brand. SYS became one of the “local” companies with its acquisition of AEI Systems and plans to serve the end-users in the United Kingdom as well.

AEI Systems’ 30x113 mm cannon is the only cannon produced in the United Kingdom in this caliber. With the SYS’ investments on making this cannon a final product and UNIROBOTICS’ contributions regarding weapon integration will provide British end-users with a “local” weapon in this class. 30x113 mm cannon will be a leading solution for the land and sea platforms United Kingdom plans to accept into service.

Aral said that they would be providing added value for the United Kingdom with their future efforts as well: “SYS acquiring AEI Systems will be one of the most significant defense collaborations between Türkiye and United Kingdom. We will grow both AEI Systems and SYS. We will be supporting the markets where Türkiye is stronger from Türkiye and where United Kingdom is stronger from United Kingdom. We evaluate United Kingdom has a similar outlook as well, as the questions we received during NSIA process did have some clues of this kind of viewpoint.”

 

SYS’ Export Efforts to Accelerate Further

Aral also shared that their exports would accelerate further: “SYS will be targeting foreign markets as usual. We also think 30x113 mm cannon will be crucial for Türkiye as well. After the qualification process for the cannon is complete, and UNIROBOTICS completes its works regarding TRAKON 30 turret, we will add this niche to the cooperation we have with all the large platform producers as well. We are working together with many companies regarding CANiK M2 QCB already. We will enhance said collaborations with 30x113 mm cannon.”

 

Much to Be Done

SYS acquiring 80 percent of AEI Systems coincided with an important period of SYS’ growth. Aral shared the following: “When we consider CANiK USA production facilities will become operational in June 2023 and UNIROBOTICS will have an intense delivery schedule, the acquisition of AEI Systems completed our investment planning for the next 7 years. Our priority target in the next 7 years will be ensuring all these companies and factories will be running like a machine with the highest production volumes.

We will be investing in product development and production from now on, rather than acquiring companies. Our future will test SYS’ mettle regarding the challenges of being a truly global company. When we get through these challenges, our SYS will be much stronger, much more confident, and perhaps even unrivalled.”