Creation and early years
In early 2001, defence minister Lewis Moonie announced the creation of QinetiQ via the privatisation of the Defence Evaluation and Research Agency (DERA). At the time, Moonie stated that the entity would remain a British business, being based in the UK, and that the Ministry of Defence (MoD) would retain a 'special share' in the company, while safeguards would be in place to prevent conflicts of interest.[7]
By April 2002, while QinetiQ had taken steps to operate on a commercial basis and saw third parties as its key growth area, 80% of its annual sales was reportedly being derived from the UK MoD. It was observed that QinetiQ's close relationship with the MoD gave it a competitive edge over most private-sector rivals.[8]
Initially, QinetiQ was entirely owned by the British government; it was planned for a stock market flotation of the firm to be conducted sometime during 2002.[9] However, this flotation was postponed; according to aerospace industry periodical Flight International, a lack of investor confidence was the principal reason for the delay.[10]
In late 2002, the Carlyle Group, an American private equity firm, publicly declared its intention to purchase a large stake in QinetiQ.[11][12] In February 2003, the Carlyle Group completed the acquisition of a 33.8% share for £42 million. Prior to QinetiQ's flotation years later, ownership of the firm was divided between the MoD (56%), Carlyle Group (31%) and staff (13%). The Carlyle Group was expected to remain invested in QinetiQ for between three and five years, after which a stock exchange float would take place.[13]
In September 2004, QinetiQ acquired the US defence companies Westar Corporation[14] and Foster-Miller, maker of the Talon robot.[15] Also in 2004, it acquired HVR Consulting Services a leading UK-based engineering consultancy.[16]
In early August 2005, the company announced it would acquire Apogen Technologies, Inc., pending regulatory approval; according to QinetiQ's website, the purchase came at a cost of $288.0m (£162.7m).[17] In September 2005, the company acquired a 90% share of Verhaert Design and Development NV (VDD), a Belgian space systems integrator.[18] In October that year, it acquired Broadreach Networks Limited, a supplier of Wi-Fi internet equipment to the European rail industry,[19] and in February 2006, it bought Graphics Research Corporation Ltd, developer of the Paramarine software suite of ship and submarine design tools.[20]
Stock exchange listing
On 12 January 2006, an announcement was made in Parliament by John Reid, Secretary of State for Defence, regarding the pending floatation of QinetiQ. Reid stated that the Carlyle Group 'will continue to retain a significant stake in the company', and that the government would continue to hold a 'golden share' to protect the UK's security and defence interests.[21] On 10 February 2006, QinetiQ was floated on the London Stock Exchange. The valuation of the company, and of how much taxpayers would benefit from QinetiQ's privatisation, was a subject of considerable debate and controversy.[22][23][24][25]
The company had been valued at between £1.1bn and £1.3bn, with the MoD holding estimated to be worth £616m – £728m, the Carlyle Group's holding £341m – £403m, and staff/management's holding worth £143m – £169m.
NAO inquiry
In 2007, the National Audit Office conducted an inquiry into the privatisation to determine whether UK taxpayers received good value for money. The inquiry looked at the following issues: In November 2007, the NAO reported that taxpayers could have gained "tens of millions" more and was critical of the incentive scheme given to QinetiQ managers, the 10 most senior of whom gained £107.5 million on an investment of £540,000 in the company's shares. The return of 19,990% was described as "excessive" by the NAO. The role of QinetiQ's management in negotiating terms with the Carlyle Group while the private equity company was bidding for the business was also criticised by the NAO. Carlyle bought a third of the business for £42 million, which grew in value to £372 million in less than four years.[31] However, the Ministry of Defence defended the sale:
- the choice of privatisation strategy;
- management of the process (the split of the Defence Evaluation and Research Agency into two, the sale to Carlyle and the flotation);
- costs incurred and the proceeds achieved; and
- whether the deal met its objectives.[30]
Expansion
In January 2007, the company bought Analex, a US corporation that provides high technology professional services, principally to the US government and its agencies.[32] It was originally incorporated in 1964 under the name Biorad and evolved into Hadron, a US government systems consulting firm.[33]
In February 2007, the acquisition of ITS Corporation, a provider of IT services to the US government and its agencies, was announced.[34] The disposal of Aerospace Filtration Systems (formerly part of Westar) was announced at the same time.[35] In June of that year, QinetiQ announced that Apogen Technologies Inc., its US subsidiary, had completed the acquisition of 3H Technology LLC, a specialist IT company with US government and commercial clients.[36] In October, the company completed the acquisition of Boldon James Holdings Limited
Cyber security
During mid-2013, reports emerged that Chinese hackers had allegedly compromised sensitive military research being performed by QinetiQ.[45] It was claimed that, between 2007 and 2010, QinetiQ's North American business was the subject of a cyber-attack. At the time of the incidents, the company said it disclosed all of its breaches to the responsible government agencies and these were resolved to their satisfaction.[46] The Pentagon has stated that it still entrusts QinetiQ with sensitive defence technology.[47] The issue of cyber security affected other organisations; a Pentagon report stated that various US government agencies had been victims of cyberattacks.[48]
QinetiQ provides auditing and consultancy services on cyber security to third party businesses.[49] In 2011, the company announced the launch of a strategic collaboration with information security firm
