Growing gains? Financial scalability of the Dutch defence industry by private equity

This chapter presents the results of our research into the potential for financial scalability of the defence industry caused by the increase in investments in this industry, specifically by Private Equity (PE) firms. It investigates the following questions: (1) to what extent does the Dutch defence industry use private equity as a source of business capital; and (2) what are the effects of the use of private equity in the growth of the companies involved? To this end, we analyse current financial statements of the defence industry in the Netherlands. Based on a comprehensive dataset we determine if and how much, PE firms invest in national defence corporations, as an indicator for scalability in the defence industry. Results show that the involvement of private equity in the Dutch defence industry is still rather small; however when PE is applied, companies seem to benefit from the financial injections of PE, showing higher amounts of average total assets and higher average revenues and profits. This indicates potential for financial scalability.