Kongsberg Group’s (KONGSBERG) acquisition of Rolls-Royce Commercial Marine sent shockwaves through the industry. From seemingly out of nowhere, the Norwegian headquartered global leader in control, positioning, safety and automation acquired one of the biggest names in ship design, deck and rotating machinery. On the eve of the official takeover, 1 April, KONGSBERG President & CEO Geir Håøy explains both the rationale behind the purchase and what lies ahead.
It’s that simple. When Geir Håøy, previously the CEO of Kongsberg Maritime and now KONGSBERG group President & CEO, is asked about the motivation behind the approximately GBP 500 million purchase of Rolls-Royce Commercial Marine, that’s the answer.
One word. And a smile.
End of interview?
Thankfully, after a rather long second, he elucidates.
“Strategic growth,” he says. “We want to secure a bigger footprint upon our customers’ assets and by adding the Rolls-Royce Commercial Marine product portfolio and expertise to that of Kongsberg Maritime we become more of a complete solutions provider.
“That adds value for our customers while strengthening our position with them, be they shipowners, yards or other strategic partners. We become more of a ‘one stop shop’ with established expertise across a whole spectrum of systems and solutions. We believe that is a powerful proposition.”
And then there’s the ‘scale’.
Everything about this acquisition is big. The money, the turnovers (Rolls-Royce Commercial Marine’s was NOK 8.9 billion in 2017, while KONGSBERG’s was NOK 14.5 billion), the global networks (KONGSBERG has operations in 25 countries, Rolls-Royce Commercial Marine 34) and the people, with the purchase set to add 3600 new staff to KONGSBERG’s existing 7000. And let’s not forget the market share.
“As a single entity we will now have products on around 30,000 vessels in the world fleet,” Håøy notes. “This is a very significant installed base and, along with the market position, gives us considerable opportunities within aftermarket services and additional sales.
“We really do see this as an excellent ‘fit’.”
A fit that, as maritime continues to evolve, Håøy believes will become increasingly seamless.
“The digitization of the shipping industry is well underway,” he states, “but there is a lot of potential for development. One of the main areas of that development will be further automation and autonomy. As assets become increasingly connected – as singular vessels, across fleets and with on-shore operations – there is greater demand for system integration. Having one supplier providing complete solutions makes perfect sense in that regard – with a more ‘joined up’ approach delivering enhanced performance, efficiency and data driven intelligence. This will impact positively on both operations and businesses.”
Together KONGSBERG and Rolls-Royce Commercial Marine will provide a vast menu of options for customers, ranging from KONGSBERG’s market leading dynamic positioning and sensor-based technology, through to Rolls-Royce Commercial Marine’s cranes, deck machinery and, as revealed in a test with Finland’s Finferries in December last year, fully autonomous berth-to-berth vessel systems.
Håøy says the combined firm is ideally positioned to be a “trend setter” and enabler for the shipping industry, helping it move forwards and take advantage of future business opportunities.
All eyes on Nor-Shipping
Although the new firm comes into being on 1 April, Nor-Shipping, taking place in Lillestrøm and Oslo between 4 and 7 June, will be the first opportunity for it to really connect ‘face to face’ with the entire industry.
“This is an important arena for us,” reveals the KONSBERG CEO. “Nor-Shipping gathers the whole of the maritime value chain, from right around the world, in one location. Everyone from shipowners and shipyards to equipment suppliers, brokers, class societies and financial institutions mix together, and that gives us an excellent opportunity to connect with existing, new and potential customers and partners. We can use this platform to present the combined company to the world.”
Håøy also believes Nor-Shipping’s new, wider focus – encompassing ocean industries as well as shipping – is good for business.
“80% of our activity is focused on the ocean, but not just on shipping,” he states. “Our technology is growing market share in fast developing industries, such as aquaculture and renewable energy, and we see huge potential for tailoring solutions based on our long maritime expertise for new business opportunities – both above and below sea level. So, Nor-Shipping’s broader remit complements our own ambitions. It’s a good fit.”
Given the dire conditions much of the maritime industry – and particularly the offshore segment, where both Kongsberg and Roll-Royce Commercial Marine have leading positions – have experienced, a devil’s advocate may suggest the acquisition represents somewhat ‘risky business’.
Håøy doesn’t seem perturbed by the suggestion.
“Both businesses have experienced reduced levels of activity in offshore, that’s true,” he says. “However, I’d argue that this move – when the industry is at the bottom of the cycle – is timed well. In short, the only way to go is up, and we’re already seeing activity escalate on the installed base, if not in newbuildings. We believe that is a positive sign for the future.”
Håøy says KONGBERG’s unique group structure, with domain expertise in defence and digital, alongside maritime, will also help the enlarged firm prosper going forwards.
He speaks of “considerable synergy” across the divisions with technology and knowledge transfer seemingly commonplace.
“The speed of development on the civilian side helps create innovation we can utilize in defence, while defence technology can be exploited for civilian purposes,” he notes. Here he nods towards the much-anticipated Yara Birkeland autonomous ship project as an example, which features sensor technology from KONGSBERG’s military applications.
“Kongsberg Digital’s domain expertise and innovation can obviously be used across industries,” Håøy adds, “and will be a real asset given the on-going evolution of maritime.”
One company, one team
Despite his optimism with regards to future opportunities, the group CEO is candid about the challenges of bringing together two such large, established and renowned brands and companies under one corporate umbrella.
It is, he admits, no simple task.
“Our focus in the immediate future will be building one company, one team,” Håøy stresses. “The last thing we want is a ‘them and us’ mentality. Obviously it will take time to complete the integration, and there will be challenges to overcome, but we know each other well and believe the existing cultures are, like the products, very complementary. So, we think this is an exciting time for everyone.”
As it is for the industry as a whole.
There’ll be a lot of observers keen to see how the acquisition plays out and how the combined firm will expand its reach across a rapidly developing maritime, and ocean industry, sector.
As such, at Nor-Shipping 2019 you can expect Kongsberg Maritime’s stand to be both one of the biggest, and the busiest. The “growth” Håøy speaks of relates not just to the business and its asset footprint, but also to industry interest.
Watch this space.
Experience Geir Håøy on stage at the Nor-Shipping Opcean Leadership Conference. Get your ticket here.