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Marine Propulsion & Auxiliary Machinery

Marine Propulsion & Auxiliary Machinery

Rolls-Royce/Kongsberg deal is just the beginning

Wed 11 Jul 2018 by Paul Gunton

Rolls-Royce/Kongsberg deal is just the beginning

Paul Gunton believes last week’s agreement to sell Rolls-Royce to Kongsberg is just the beginning

This week’s big news has been the agreement that Kongsberg will buy Rolls-Royce Marine, in a deal that values the business at £500M (US$660M). The two companies are a perfect fit for each other. There had been gossip that Wärtsilä was interested in pitching for the business but once it splashed out US$210M on buying Transas in May, it was clear that its attention was focused elsewhere.

Regular readers will know that I spent some quality time with Rolls-Royce president Mikael Makinen in May and we published an exclusive interview about his expectations for the company and for himself.

At that time, he had set a deadline of the end of this year to have negotiations underway with a preferred bidder so it came as a surprise to me that the deal with Kongsberg emerged so soon afterwards. I look forward to seeing what Mr Makinen does next: he has already said he will not be staying with Rolls-Royce and Kongsberg chief executive Geir Håøy has not said how Rolls-Royce Marine will be integrated into his organisation.

In an online interview, Mr Håøy underlined how the two organisation have strengths in different areas of technology but share other capabilities, so it is unlikely that Rolls-Royce Marine will be incorporated as a stand-alone division within Kongsberg, leaving no room for two big-hitters – Geir Håøy and Mikael Makinen. And the Rolls-Royce name will have to go: that is not included in the deal.

In his interview, Mr Håøy described the deal as important for “the entire global maritime industry”. That may seem a rather grand statement but he’s right, especially when it is seem alongside other recent developments.

I have already mentioned the Wärtsilä/Transas deal, which brings together two ranges of skills and products that, in some ways, will rival Rolls-Royce/Kongsberg. Then there was the MAN Diesel & Turbo rebranding two weeks ago that marked a step in that organisation’s strategy “to evolve from a manufacturer of components to a supplier of solutions” by adding “offerings geared towards the decarbonisation and digitalisation of industry and society.”

All three initiatives mark a trend towards diversification, ending the attraction of niche technologies and specialisation. In his interview, Mr Håøy hinted at why, when he spoke of the industry going through “a demanding period, especially in offshore”. That is what did it for Rolls-Royce.

In the past, it was enough to build on a company’s achievements to become strong and dominant in a particular technology. Now, corporations need to have broad bases so they can sustain a knock to part of their revenue stream without having to hang up the ‘for-sale’ sign.

So I agree with Mr Håøy about the importance of his purchase of Rolls-Royce. It is the biggest such deal in the marine industry for a long time. It marks a new strategy and other companies will follow.

• Do you share my view?  Email me with your views on how this affects the industry. Which will be next to get together?

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