DEUTZ (0E4K) M&A Announcement Transcript

Summary of Conference Call on the Acquisition of Sobek Group Company and Industry Overview - Company: Deuts - Acquired Company: Sobek Group - Industry: Defense, specifically focusing on Unmanned Aerial Vehicles (UAVs) Key Points and Arguments 1. Acquisition Purpose: The acquisition of Sobek is aimed at strengthening Deuts' defense business, particularly in the UAV sector, which is experiencing significant growth due to geopolitical changes since 2022 [3][4][5] 2. Market Growth: The European NATO defense budgets are expected to grow significantly, with a compound annual growth rate (CAGR) projected to continue, driven by the need for defense sovereignty and local production [6][7] 3. Shift in Defense Spending: There is a notable shift from traditional defense companies to tech-focused defense companies, particularly in the UAV sector, with drones becoming a top priority for military operations [7][8][9] 4. UAV Market Growth: The European UAV market is projected to grow at a CAGR of 23% until 2030, with a focus on small and mid-sized UAVs that are essential for modern defense strategies [10][11] 5. Sobek's Profile: Sobek is an established and profitable company specializing in high-performance electric drive and hydraulic systems for drones, with a history dating back to 1975 [12][13][14] 6. Financial Performance: Sobek generates annual revenues in the low to mid double-digit million euro range, with an EBITDA of approximately €10 million to €12 million [15][16] 7. Defense Market Share: Currently, around 50% of Sobek's business is related to military drones, with expectations for further growth in this area [52][66] 8. Strategic Fit: The acquisition aligns with Deuts' dual-plus strategy, transitioning from a focus on internal combustion engines to a more diversified business model that includes defense and technology integration [28][30] 9. Transaction Details: The acquisition was negotiated at an EBITDA multiple of 11x, which is considered favorable for the defense sector [31][74] 10. Future Growth Potential: Deuts expects to leverage Sobek's technology and market position to expand into new defense ecosystems and enhance its product offerings [27][28] Additional Important Information - Local Supply Chains: Sobek's operations in Germany provide a resilient supply chain, which is critical for military applications [24][25] - Market Positioning: Sobek is already a trusted partner to leading European defense tech companies, positioning Deuts to capitalize on emerging defense opportunities [23] - Employee Structure: The defense business unit consists of a small, specialized team of less than 50 employees, focusing on both military and civil applications [41][42] - Long-term Vision: Deuts aims to grow its defense business significantly over the next few years, contributing to its overall revenue target of €4 billion by the end of the decade [69] This summary encapsulates the key insights from the conference call regarding the acquisition of Sobek Group and the strategic direction of Deuts in the defense industry.