The Benefits of Privatization
What privatization processes the IAI will follow and how the company will be controlled after it is privatized is the hottest issue at IAI these days. One of the past obstacles to the privatization process was the defense ministry requirement to control certain aspects of the company even after it is privatized. Similar issues evolved in Europe during the privatization of nationally owned defense companies. In Europe, most governments maintained some control of the privatized corporations, although these ‘golden stock’ privileges were not required often. In the US all A&D companies operate without such restrictions. In Israel, this issue is still in discussion. it is obvious that the fully privatized formation is preferred, as it is restrictive for mergers and acquisitions. National interests can be maintained through checks and balances the Ministry of Defense is authorized to maintain on the regular conduct of business, and it is the MOD who will determine the process the company should follow.
Pending the successful completion of such process, IAI is expected to embark on a campaign to restructure existing affiliated companies, establish subsidiaries in strategic markets, and undertake selective acquisition of companies that could offer the company better access to market or technologies.
Unlike some of its competitors, IAI’s growth sofar is attributed only to internal growth. Therefore, the company offers significant upside for further growth, leveraging mergers and acquisitions which it has not exercised effectively sofar, being restricted in its business decisions, as a government owned entity.