“Growth is the only way. We are ready to make new acquisitions”. The president and CEO of the European defence and sports activities group Beretta Holding explains its strategies and next moves.

by CARLO CINELLI, Il Corriere della Sera - translation from Italian

“European industrial facilities – of the highest standard – will certainly follow on from this. The events of the last two years have brought the topic of a common European defence policy to the forefront, but this is a subject that is being discussed by politicians, not businesspeople and this is the way that things should continue. As business people, the only thing that we can do is respond to the debate that is currently developing. Angelo Panebianco painted a perfect, highly-informed picture of what Europe is currently going through in his recent opinion piece for the Corriere della Sera” (article in Italian, dated 22/10/2023).

Thanks to his experience and connections, Pietro Gussalli Beretta, the president and CEO of Beretta Holding, has a very clear view of the current geopolitical context. What is more, this European industrial group has just taken a significant leap with its takeover of Ruag Ammotec, Europe’s main manufacturer and supplier of light ammunition, making it almost unique in the market.

After its “long sleep”, to echo words from the title of Panebianco’s editorial from Sunday 22nd, should Europe start to take action for its own defence and security?

“Following the invasion of Ukraine, a lot of European governments realised that they were unprepared and did not have the necessary forces for facing similar events. This made them aware of what could have occurred if this had happened elsewhere. However, it is understandable that they were unprepared as very few people foresaw the attack on Kiev, even after what had happened in Serbia, and even amongst leading military experts. And now, if you include Israel, the number of conflict zones have increased even further. Governments are worried about this as the situation has changed undeniably over the last 18 months. So northern and eastern European countries now want to ensure that they are better prepared: they are planning higher defence investments, they want to strengthen their own knowledge and build new factories within their borders. If you take a map of Europe and start in Norway and move down through to Poland and the other big Eastern European countries, you will find that the governments of a number of these countries are all thinking along these lines.”

And in Italy?

“There is some demagogy, but from an industrial point of view Italy has some superb defence firms. These companies now export 95% of their production, but their know-how is remarkable and no other country can even come close to this. Italian defence companies make a living from selling abroad, for budget and trade balance reasons, and they are key players who represent absolute excellence in a number of sectors. For example, the Leonardo group are very successfully focusing on excellence and highly advanced technology. I believe that, for a group of their size, international alliances are fundamental and they have been able to put these into place in a very successfully way.

Politics can facilitate alliances and production, either directly or indirectly.

“Politicians have recently discovered a more dangerous and more difficult world. A few years ago, before the war in Ukraine, a lot of people were claiming that conventional conflicts would no longer occur. This was very significant in all respects and everything was easier to manage. However, Italy is lucky to have had leaders who have had a very clear agenda on the importance of a common European defence policy during these recent difficult situations. I feel that even the current leaders are heading in this direction, with great professionalism and very thoughtful reflection. It is very important that they are proceeding in this manner as the dangers which would result from increasing the crisis areas are enormous.”

Beretta Holding Group has quite a different profile compared to 12 months ago. The purchase of Ruag Ammotec from the Swiss government, with impeccable timing, has opened up the German ammunition market to the group, just as the German government is heading towards a plan to increase German military spending to more than 2% of the country’s GDP. Beretta Holding Group’s net sales are already in excess of 1.4 billion euros (1.5 billion US dollars) with a gross operating margin of 286 million euros (around 306 million US dollars). And if the company had consolidated Ammotec from the beginning of 2022, then its net revenue would have been 1.7 billion euros (1.82 billion US dollars) with an EBITDA of 350 million euros (375 million US dollars).

“Good timing? Well, you know a bit of luck never hurts and it is true that with hindsight everyone’s a strategist (smiles). However, Ammotec was certainly the ideal acquisition – Ammotec was our twin, a European leader with well-located factories and a fantastic management team. There were a number of strong, non-Italian contenders competing with us to take it over. The Swiss government considered the global view, including the fact that we are a group with a certain credibility, from a credible country. We also have excellent relationships with Ammotec’s managers, whom we have already worked with. But in the end, it was a political decision.”

Had you been considering this acquisition for a long time?

“Yes, for a very long time, but not in the way that you might think. Up until the middle of the 1990s, Beretta had a foreign partner which owned 35% of the company’s shares. This partner was a French, state-owned company, something which made little sense. We wanted to buy back these shares and I convinced my father and brother to do this. This project, in which Mediobanca played a crucial part, required the creation of the holding company. This allowed us to create a different type of management and proceed to develop greater governance and increase our internationalisation. We undertook a number of acquisitions. One decisive step was developing optics and targeting systems, undoubtedly our most technologically advanced sectors. Adding ammunition to these two areas was an almost mandatory step for us, as this was the third pillar that we needed to become all-round partners for our customers in the fields of hunting, sports shooting, law enforcement and the military. We have also added a clothing division for hunters, sports people and the armed forces.”

How will Ammotec grow?

“We have always had industrial and development plans and now it will be possible to take these even further. We have a number of strong development synergies and opportunities, including in terms of design. Also, while the common European defence policy is our closest opportunity, the USA remain our greatest challenge. This is one of the important areas that we feel we should target, even though this is not a short-term project and will take us a number of years. We are currently building a factory in the USA, in Savannah, Georgia. On its own, this represents an investment of 80 million euros (around 86 million US dollars) from an existing investment plan of around 500 million euros (around 536 million US dollars) spread over the next 5 years. We know that if we want to grow in this market, one which is very promising from a commercial and civil point of view, then we must also manufacture ammunition there.

Civilian and military markets. Currently, 80% of your production is for civilian use and 20% for defence purposes. In 5 years’ time will this still be the case?

“Already today this 80/20 ratio is actually closer to 70/30. I would say that in the future our defence sales percentage will undoubtedly grow, but this will be highly dependent on the next acquisitions that we make. We will continue to change. In 5 years’ time we will still be focusing on mergers and acquisitions. But the relationship between the two core parts of the group is not something that we can predict for the moment. Currently, we have a sound financial position, following our purchase of Ammotec. Our accounts are balanced and are showing positive signs for the end of the year. So, if any opportunities arise, we will certainly consider them. However, our objective is to find the best prospect that will also allow us to grow in the way that we have stated, with businesses which will increase our technological know-how.”

Will these companies be similar to the one that you recently bought in Switzerland?

“No. We will talk about industrial investments in partnership with state governments. However, our potential acquisitions will not be state-owned companies, rather quality industrial companies that manufacture products which complement our current product range. These will always be products which have a technological advantage. This is our approach. We will also occasionally look into companies that could allow us to grow in new markets. But we will never be distracted.”