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Hensoldt: Germany's "Eyes and Ears" of Defense
I. Introduction & Episode Roadmap
Picture this scene: April 2018, Berlin. Two F-35 stealth fighters—the crown jewels of American military aviation, each costing over $100 million and engineered to be invisible to radar—take off from the ILA Berlin Air Show and turn westward toward the Atlantic. Deep inside a nondescript building at the airshow grounds, a team of German engineers watches their screens with growing excitement. Their passive radar system, TwInvis, has just accomplished something that was supposed to be impossible. Hensoldt claims to have detected two F-35 fighter jets as they were leaving from the ILA Berlin Air Show in 2018 with their passive TwInvis radar system.
This wasn't a provocation. It was a proof of concept that would help define one of Europe's most fascinating corporate transformations of the past decade.
Hensoldt AG is a German multinational corporation headquartered in Munich which focuses on sensor technologies for protection and surveillance missions in the defence, security and aerospace sectors. The main product areas are radar, optoelectronics and avionics.
The central question of Hensoldt's story is this: How did an orphaned division of a European aerospace giant become a €2.2B strategic national champion in just seven years—and why did the German government decide to buy a blocking stake?
The answer involves private equity transformation, battlefield validation in Ukraine, and something the Germans call "Zeitenwende"—a turning point in history. It's a story about the economics of defense electronics, the strategic calculations of governments-as-shareholders, and the peculiar alchemy that happens when precision optics meets cutting-edge radar technology in an era of renewed great power competition.
Consider the numbers: The order backlog at Group level climbed to a record level of EUR 6,644 million, an increase of 20% compared to the previous year. In 2024, HENSOLDT achieved a turnover of 2.24 billion euros. Following the acquisition of ESG GmbH, the company employs around 9,000 people.
This is a company that didn't exist as an independent entity eight years ago. Now it stands at the center of European defense electronics, with radars protecting Ukrainian cities, sensors on German submarines, and contracts that will shape the continent's military capabilities for the next two decades.
Let's trace how this happened, starting with a heritage that stretches back to the optical workshops of 19th-century Germany.
II. Heritage & Predecessor Companies: 125 Years of German Optics & Electronics
The Deep Roots
In the small town of Sonneberg in Thuringia, in 1852, a machinist named Moritz Carl Hensoldt established what would become one of Germany's most consequential optical workshops. The company's name can be traced back to Moritz Carl Hensoldt (1821–1903), a German pioneer of optics and precision mechanics in the 19th century. In 1852, he founded an optical workshop for telescopes, astronomical equipment and microscopes.
In 1865, Moritz Hensoldt moved it to Wetzlar, Germany. (Kellner's Optical Institute went on to fame as the company of Ernst Leitz in Wetzlar.) This relocation to Wetzlar placed Hensoldt at the heart of what would become Germany's optical industry cluster—the same region that later gave birth to Leica cameras.
What made Hensoldt stand out wasn't just the quality of his lenses but his willingness to bet on unconventional designs. Moritz Hensoldt develops the world's first binoculars with roof prisms. Not much later in 1893, the company developed its first prism binoculars, optical rangefinder, and scissors telescope. Roof prism is one of the most important inventions by Hensoldt AG in the 19th century, which the manufacturer used in the world's first set of roof prism binoculars in 1897.
The roof prism design was a gamble. At ZEISS in Jena, however, roof prism systems for normal binoculars are considered too expensive and difficult and not promising anyway. HENSOLDT, on the other hand, bets everything on this card, and with great success. Roof prisms allow large objective diameters and bright images in an extremely slim and handy housing.
The company started producing riflescopes for the Prussian army in 1892, which marked the first step in more than 125 years of optics production for the defense industry. This relationship with the German military would define the company's trajectory through two world wars and into the modern era.
Key Historical Milestones
The company's technological DNA comes from multiple sources, each contributing essential capabilities. Our company's know-how is based on the pioneering spirit of our renowned predecessor companies, including AEG, Aerospatiale-Matra, Carl Zeiss, Cassidian, Daimler, Dornier, EADS, Siemens, Telefunken, and Airbus. These pioneers have driven technological advancements to enhance threat detection and protect our societies and citizens.
The radar heritage is equally deep. Telefunken develops the first air defence radar. And the precision optics tradition continued to evolve—With the development of the then still young optics industry, especially microscopes and binoculars, the namesake is also the progenitor of the "Optronics" division of HENSOLDT AG. The prism and mirror optics he perfected were first used for stereo binoculars and later also in the periscopes of submarines. These are still manufactured by HENSOLDT.
After the death of the owner in 1928, Carl Zeiss went into a partnership with Hensoldt AG. In 1935, the corporation developed one of the first anti-reflection coatings for optical devices, particularly riflescopes and binoculars. Zeiss gradually acquired complete ownership of Hensoldt by the year 1968.
The decades that followed saw these technologies consolidate under various corporate umbrellas—from individual German companies through EADS to Airbus Defence and Space. Each merger brought together complementary capabilities: radar from Telefunken's descendants, optronics from the Zeiss-Hensoldt lineage, electronic warfare systems from multiple sources.
Tie to Present
What matters for today's investors isn't the genealogy itself but what it represents: Additional German entities include EuroAvionics GmbH for avionics integration. These domestic subsidiaries underpin the company's technological heritage from predecessors like Zeiss and Telefunken.
This isn't a company that had to build defense capabilities from scratch. It inherited 125 years of accumulated knowledge in precision optics, radar physics, and electronic warfare. When the German government looks at Hensoldt, it sees continuity with institutions that have protected German soldiers since the Kaiser's time.
At the same time, Hensoldt also laid the moral foundation for HENSOLDT AG 175 years ago: the spirit of innovation and entrepreneurship, progress and efficiency as the basis for success. With this principle, Moritz Hensoldt left a lasting mark on the company.
The heritage explains why KKR saw value in the Airbus spinoff in 2017, and why the German government moved so quickly to secure a blocking stake after the IPO. This wasn't just another defense contractor—it was the institutional memory of German defense electronics, wrapped in a newly independent corporate form.
III. Inflection Point #1: The Airbus Spinoff & KKR Acquisition (2017)
Why Airbus Divested
In the world of large industrial conglomerates, focus has value. By 2016, Airbus Group's leadership had concluded that its defense electronics division—excellent as it was—didn't fit neatly into their strategic vision of being the world's premier aerospace manufacturer. Defense electronics requires different capital allocation, different customer relationships, and different competitive dynamics than building commercial aircraft.
The company originated from the electronics business unit of the defence division of the Airbus. At the end of February 2017, Airbus sold this business unit to the US financial investor KKR for 1.1 billion euros.
The company's creation was driven by the need for a focused, agile entity to meet the evolving demands of the defense and security sensor market.
The €1.1 billion price tag for a business generating roughly €1 billion in annual revenue might seem modest. But this was a complex carve-out with thousands of employees, multiple product lines, and deep integration into Airbus's supply chain. KKR & Co. L.P. completed the acquisition of 74.9% stake in defence electronics business from Airbus Defence and Space GmbH on February 28, 2017. Airbus will maintain a 25.1% minority stake for a limited number of years post-closing.
Airbus keeping 25.1%—a blocking minority—was itself a signal. This wasn't a complete exit but a structured transition that would maintain defense relationships while allowing the new entity to operate independently.
The KKR Playbook
Following the closing of the transaction between Airbus Group SE and KKR, a leading global investment firm, a new European defence company headquartered in Germany, HENSOLDT, has been launched. The new company employs 4,000 highly qualified staff, about 3,400 in Germany and 600 in South Africa. The main industrial sites are Taufkirchen/Munich, Ulm, Friedrichshafen and Oberkochen in Germany and Pretoria in South Africa.
The new company, headquartered in Taufkirchen close to Munich, will be led by an Executive Committee comprising CEO Thomas MĂĽller, head of HR Peter Fieser, head of Finance Axel Salzmann and head of Operations Peter Schlote.
The decision to name the company after the 19th-century optics pioneer was strategic, not nostalgic. The resulting company took its name from a 19th-century German optics pioneer, rooting itself in a tradition of precise German engineering. In German defense circles, the Hensoldt name carried weight—it signaled continuity with a proud tradition while enabling a fresh start.
KKR's playbook for defense electronics followed their industrial investment model: install experienced management, provide capital for growth investments, and prepare the company for an eventual public market exit. But defense is different from typical PE targets. The founding of Hensoldt was a strategic move to specialize in defense and security electronics. The company's name pays tribute to a pioneer in optics, reflecting its heritage.
Immediate M&A Strategy
KKR moved fast. Within months of closing, Hensoldt was making acquisitions to fill capability gaps and expand market reach.
In August 2017, Hensoldt acquired the German-based company EuroAvionics GmbH, a supplier of civil avionics systems for helicopters and UAVs.
In September 2017, Hensoldt acquired the British radar manufacturer Kelvin Hughes from the private equity firm ECI.
The Kelvin Hughes deal was particularly significant. Here was a British firm with deep expertise in naval and maritime radar—technologies that would become increasingly important as European navies modernized their fleets. The combination immediately made Hensoldt a more complete sensor company, able to address air, land, and sea applications.
The strategic logic was clear: HENSOLDT has further expanded its capabilities through strategic acquisitions. These include the German company Euroavionics, British radar specialist Kelvin Hughes, and the start-up PentaTec. We also integrated the French company Nexeya and IE Asia-Pacific into our portfolio. With the acquisition of Tellumat, we strengthened our radar expertise in South Africa.
By the time Hensoldt was ready to go public, it had transformed from a spinoff into an integrated sensor company with European-wide capabilities and a track record of successful integration.
IV. Inflection Point #2: The 2020 IPO & German Government Stake
Going Public
September 2020 was not an obvious time to take a defense company public. The COVID-19 pandemic had disrupted markets globally. Defense budgets faced questions as governments redirected spending toward healthcare and economic stimulus. Yet Hensoldt and KKR saw an opportunity.
KKR & Co.-backed defense supplier Hensoldt said it plans an initial public offering in Frankfurt that would be the biggest of the year in Germany, helping to drive a revival of a market that has lagged behind other European exchanges for most of the year. Hensoldt will sell new stock to raise capital in the IPO, and KKR plans to sell shares as well, the company said in a statement Tuesday. Hensoldt didn't specify the size of the deal, which it aims to complete by the end of the year.
The shares of HENSOLDT AG are listed in the Prime Standard (regulated market) of the Frankfurt Stock Exchange since September 25, 2020. The Prime Standard is the segment of the German stock market with the highest transparency requirements, focusing on the interests of investors.
On 25 September 2020, Hensoldt AG was listed in the Prime Standard of the Frankfurt Stock Exchange at an issue price of 12.00 euros. Based on the issue price, the market capitalisation amounted to 1.26 billion euros.
The €1.26 billion market cap represented a modest premium to what KKR had paid for the business just three and a half years earlier. But the real story was about to unfold.
The Strategic Shareholder Moves
What happened next was unprecedented in German corporate history. Within weeks of the IPO, two major strategic investors moved to acquire blocking stakes—signaling that Hensoldt was no ordinary defense contractor.
KfW acquires 25.1% of shares in HENSOLDT AG on behalf of the German Federal Government ("mandated transaction"). Opportunities and risks arising from the transaction lie with the Federal Government, and KfW does not assume any entrepreneurial or strategic responsibility. Shareholder rights are exercised by the German Federal Government.
KfW agreed to acquire a 25.1% stake in Hensoldt AG from KKR & Co. Inc. for approximately €330 million on December 14, 2020. Upon completion of the transaction, KKR will retain a 43% stake.
The 25.1% figure was not arbitrary. Under German corporate law, this represents a "Sperrminorität"—a blocking minority that enables the holder to veto major structural decisions. The Bundeskartellamt has today cleared the acquisition by Hensoldt Holding Germany GmbH, Taufkirchen, of ESG Elektroniksystem- und Logistik-GmbH, Munich. The federal government holds a 25.1 per cent stake in Hensoldt through the German promotional bank KfW.
LEONARDO S.p.A. announced today that it has signed a purchase agreement for 25.1 percent of the shares in HENSOLDT AG with HENSOLDT's majority shareholder Square Lux Holding II S.Ă r.l., a portfolio company of investment funds advised by KKR. HENSOLDT thus will gain one additional major shareholder and future potential strategic partner.
Im April 2021 erwarb der italienische Rüstungskonzern Leonardo S.p.A. eine Beteiligung in Höhe von 25,1 %.
The result: Hensoldt had two 25.1% shareholders—the German government and Italy's largest defense contractor—with KKR retaining a significant stake. This ownership structure sent a clear message to the market: this company was strategically important, protected at the national level, and positioned for long-term partnerships.
Post-IPO Performance
Only few weeks after the successful IPO, HENSOLDT entered the German SDAX index in December 2020. This – together with the announcement by the German federal government to acquire a 25.1 % stake in HENSOLDT from KKR – underlines the great confidence in HENSOLDT's competencies and its key role within the German security and defence sector.
HENSOLDT's order backlog increased by 55.5 % to EUR 3,424 million in the reporting year 2020 (previous year: EUR 2,202 million).
The order backlog explosion—from €2.2 billion to €3.4 billion in a single year—demonstrated that the IPO had unlocked growth. Government and industry customers who might have hesitated to commit to a PE-owned company now saw a stable, strategically anchored partner.
HENSOLDT was founded as an independent company in 2017 when it was spun off from Airbus Group and went public only three years later in September 2020. Since then, HENSOLDT has consistently pursued its growth course and continuously increased its innovative strength.
V. Inflection Point #3: The Zeitenwende & Ukraine War (2022-Present)
The Turning Point
On February 24, 2022, Russian forces crossed the Ukrainian border, and the postwar European order shattered. Three days later, German Chancellor Olaf Scholz stood before the Bundestag and declared what he called a "Zeitenwende"—a turning point, a historical watershed.
The struggle for a new world order that lies ahead in the years to come announced itself in 2022 in fundamental changes of course: In Germany, the Zeitenwende (turning point) proclaimed by Chancellor Scholz a few days after the outbreak of war represents a caesura in the country's foreign and security policy. With its new basic security policy strategy, the European Union has embarked on the path toward a military union. Against the backdrop of a significant increase in NATO's importance, the reinvigorated transatlantic alliance has completed its biggest strategic realignment since the Cold War.
For Hensoldt, the implications were immediate and profound. "We have seen a fundamental change in our production philosophy," Lothar Belz, company spokesperson for German sensor manufacturer Hensoldt, said. This stems in large part from the increased demand, he said. While in the past Hensoldt usually delivered fewer than five large radars per year, those numbers have now risen to over 15 annually. By 2025, the cadence is expected to be 20 per year, according to Belz. Output from certain departments – such as remote sensing and electronic warfare – has increased threefold since the "Zeitenwende."
About half of Hensoldt's radar production is destined for Kyiv this year, Belz said. It's an example how "Zeitenwende" – which translates into something like turning point or watershed moment – is slowly seeping into Germany's defense policy and industry apparatus. At Hensoldt, the dictate of the Zeitenwende has affected everything, ranging from production – "we now do industrial serial production," Belz said – to the supply of components and even the handling of testing and the handoff of finished systems to customers.
The TRML-4D "Celebrity Radar"
If any single product defines Hensoldt's transformation, it's the TRML-4D radar. This ground-based air defense sensor has become what industry observers call a "celebrity radar"—its battlefield performance in Ukraine validating years of German engineering investment.
The TRML-4D is based on the latest AESA (Active Electronically Scanned Array) radar technology. It ensures the rapid detection and tracking of around 1,500 targets within a radius of up to 250 kilometres. It is capable of quickly and reliably detecting, tracking and classifying all types of aerial targets - cruise missiles, drones and aeroplanes as well as helicopters.
They were made operational literally "overnight": when an error message occurred during the final acceptance test of the first TRML‑4D, originally planned for another partner, on a Friday, the team worked through the entire weekend to replace a component. By 00:15 on Sunday morning, the sensor was functional again. The TRML‑4D was transported to Ukraine on the same day.
For the first time in real war operations in Ukraine, the TRML‑4D quickly demonstrated its true capabilities in protecting critical infrastructure and the civilian population in Kyiv and Odessa as well as other cities. At the express request of the Ukrainian and German governments, HENSOLDT succeeded in ramping up production within a very short time. By the end of 2023, more than ten units were already in reliable service in Ukraine.
The Ukrainian Air Force's response was exceptional. The letter reads: "The Air Force Command of the Armed Forces of Ukraine presents its compliments to HENSOLDT (...). According to the results of the use of the TRML‑4D radar by the Air Force of the Armed Forces of Ukraine, its high effectiveness to detect the entire range of threats has been confirmed."
In 2022 the company delivered four TRML-4D radars for Ukraine's Diehl Defence IRIS-T surface-launched medium-range air-defence systems, and a further four for the air-defence system in June 2023. Over the course of 2023 Ukraine also received eight standalone TRML-4D radars, independent of the IRIS-T SLM system.
The orders kept coming. German sensor solutions provider HENSOLDT has secured a major contract to supply advanced radar systems to Ukraine, aimed at boosting the country's air defence capabilities. The order, valued at more than €340 million, includes deliveries of TRML-4D high-performance radars and SPEXER 2000 3D MkIII short-range radars.
European Sky Shield Initiative (ESSI)
Ukraine was the crucible, but the European Sky Shield Initiative represents the structural opportunity. The European Sky Shield Initiative (ESSI) is a project to build a ground-based integrated European air defence system which includes anti-ballistic missile capability. As of 2025, 24 European states participate in the initiative. The initiative was originally proposed by the Chancellor of Germany Olaf Scholz in August 2022.
This means that HENSOLDT currently has more than 80 air defence radars of various ranges under contract as part of the ESSI initiative alone. HENSOLDT CEO Oliver Dörre said: "The pent-up demand in European air defence is enormous."
With the TRML-4D and SPEXER 2000 3D MkIII radars, HENSOLDT already provides a significant part of the required radar technology.
The ESSI represents a fundamental shift in European defense procurement—from ad hoc national purchases to coordinated continent-wide acquisition. For Hensoldt, it means multi-year visibility and the kind of production volumes that justify factory investment.
Taufkirchen/Germany, 22 July 2024 – Sensor solutions provider HENSOLDT recorded an order intake of well over one billion euros in the first half of the year. Major orders such as the German "Air Defence System, Short- and Very Short-Range", or LVS NNbS, commissioned in January and the massive support for the German air defence initiative ESSI (European Sky Shield Initiative) played a large part in this. "We continued to fill our order book in the first half of the year and are thus continuing our growth trajectory," says HENSOLDT CFO Christian Ladurner.
VI. Inflection Point #4: The ESG Acquisition & System Integration Play (2024)
Strategic Rationale
The sensor business was thriving, but Hensoldt's management saw a larger opportunity. Modern defense isn't about individual sensors—it's about integrated systems that connect sensors, weapons, and command structures into coherent capabilities. To play at that level, Hensoldt needed system integration expertise.
HENSOLDT has completed the acquisition of ESG Elektroniksystem- und Logistik-GmbH, which was agreed last year, with effect from 2 April 2024 after receiving all official approvals.
Founded in 1967, ESG is a manufacturer-independent system integrator and technology and innovation partner for defence and public safety.
The company develops, integrates, supports and operates highly complex, security-relevant electronic and IT systems in the fields of defence and security. ESG has established itself as a leading German systems house and plays a key role in important current and future programmes such as FCAS (Future Combat Air System) and the F-35.
Transaction valued at an enterprise value of EUR 675 million plus an earn-out of up to EUR 55 million based on specific performance targets to 31 December 2024, implying an EV/EBITDA 2024E of ~10x post run-rate cost synergies.
German Chancellor Olaf Scholz exits a vehicle after being shown a surveillance system during a visit to the German company Hensoldt in Ulm, Germany, on Jan. 16, 2023. COLOGNE, Germany — German sensor-maker Hensoldt has completed its purchase of defense electronics and logistics specialist ESG, gaining a foothold in that company's activities supporting the F-35 fighter jet and P-8 Poseidon anti-submarine plane ordered by Berlin. The takeover, announced last year as valued at €675 million (U.S. $726 million), took effect April 2 following approval by regulatory authorities here. "The acquisition adds strong design and system integration capabilities to Hensoldt's product and solutions business and creates a national champion in defence electronics," Hensoldt said in a statement.
The company employs around 1,400 people in Germany, the Netherlands and the U.S. and generated sales of around 330 million euros in 2023.
Current Scale
The combined entity is substantially larger and more capable than either predecessor. In 2024, HENSOLDT achieved a turnover of 2.24 billion euros. Following the acquisition of ESG GmbH, the company employs around 9,000 people. HENSOLDT is listed on the Frankfurt Stock Exchange in the MDAX.
HENSOLDT CEO Oliver Dörre emphasises: "The acquisition of ESG fits perfectly into our overall strategy and accelerates the development of HENSOLDT as a solution provider for defence and security. By combining the highly complementary capabilities of HENSOLDT and ESG, we are taking a decisive step towards becoming a leading European provider of seamlessly integrated solutions."
The integration is proceeding on schedule. Integration of ESG Group largely completed 200 days after closing. The excellent development in profitability was mainly driven by further economies of scale, particularly in the radar business. The strong contribution from ESG and the realisation of cost synergies also had a positive impact.
VII. The Business Model Deep Dive
Core Product Segments
Radar Systems:
Hensoldt develops and manufactures radar systems for the purposes of surveillance, reconnaissance, air traffic control and air defence. These radars are used on such platforms as the Eurofighter, the German Navy's F125 frigates and the US Navy's littoral combat ships and ground-based systems.
Ground based air defense sensors include TRML-3D and TRML-4D active radar and TwInvis passive radar.
The TwInvis passive radar deserves special attention. Unlike conventional radars that emit their own signals, TwInvis detects aircraft by analyzing how they reflect existing broadcasts—television and radio signals. HENSOLDT's Twinvis could also make a valuable contribution to ESSI. The passive radar does not transmit itself, but instead locates targets by analysing reflected signals from existing external transmitters. This 'passive' technology generates great added value in the field of air defence, especially in combination with TRML-4D.
Optronics:
Hensoldt manufactures optical and optronic devices for military and civil security applications. The main components of these devices are daylight cameras, thermal imagers, image intensifiers and laser rangefinders.
The optronic systems are used on board the Puma infantry fighting vehicle, Leopard main battle tank, 212 and 209 type submarines, Gripen and Rafale combat aircraft, AHRLAC reconnaissance aircraft, Baykar TB2 UAV, the Camcopter, Diamond DA42, and the EDRS-A satellite. In addition to this, Hensoldt also manufactures sights, targeting optics and optical systems deployed in the Leopard 2 main battle tank, PzH 2000 self-propelled howitzer, NH90 and Tiger transport and combat helicopters, as well as in the "Future Soldier" programme for modernising the infantry of the Bundeswehr, the German Armed Forces.
Electronic Warfare:
Hensoldt's product portfolio for electronic warfare includes 'Kalaetron' family of airborne electronic warfare system, including "Kalaetron Attack" aimed at jamming enemy radars. The company is also a manufacturer of systems for acquiring and analysing radar and radio signals as well as equipments which offer protection for convoys and individual vehicles from attacks by improvised explosive devices (IED).
The "Hardware-to-Solutions" Transition
The simple principle of supply and demand for individual products is no longer the way business is done in the defence sector. Today's customers want complete solutions for all their complex and individual requirements. HENSOLDT made the necessary preparations early on and developed into a sensor solution house.
The hardware-to-solutions transition follows a pattern familiar from enterprise technology. Integrating ESG's software engineering and systems integration capabilities will support HENSOLDT's positioning as a comprehensive solutions provider. ESG brings expertise in intelligent data networks to integrate HENSOLDT sensor systems across domains, creating critical integrated solutions for multi-domain operations.
At the same time, we are driving forward the transformation from a product-oriented portfolio to a solution-oriented approach under the "Pioneer Software Defined Defence" axis. The future is digital, which is why we are making targeted investments in key technologies to make our sensor technology more intelligent and better connected.
R&D Investment
Hensoldt spends 20% of revenue on R&D to stay competitive. Their TRML-4D radar's success in Ukraine proves they're keeping up. The constant innovation creates high barriers to entry.
Twenty percent of revenue on R&D is exceptional—comparable to pure-play technology companies rather than traditional defense contractors. This investment funds the continuous improvement of radar detection algorithms, new optronic sensors, and the software that integrates these systems.
VIII. Major Future Programs & Growth Catalysts
Eurofighter Radar (ECRS Mk1)
The Eurofighter program represents a generational opportunity. The sensor solutions provider HENSOLDT has been awarded a contract extension for the Eurofighter Mk1 radar worth approximately 350 million euros. Following approval by the German and Spanish Ministries of Defence, further development tasks were commissioned by Airbus Defence and Space.
The ECRS Mk1 project (Eurofighter Common Radar System Mark 1) is the next-generation Eurofighter radar that is to be fielded by the air forces of Germany and Spain. This E-Scan radar will enhance the capabilities of the Eurofighter, which Airbus produces for the German and Spanish air forces, in air-to-air and air-to-ground operations and also equip it with electronic warfare capabilities. The radar was developed by a consortium consisting of the German HENSOLDT Sensors GmbH and the Spanish Indra Sistemas S.A. Together with Airbus Defence and Space, the companies form the industrial structure that develops, certifies and manufactures the state-of-the-art military technology.
In total approximately 200 ECRS Mk1 will be delivered to the German and Spanish Air Forces.
Our goal is to start flight testing of the revised radar at the end of 2025. Installation of the Mk1 Step 1 on the German Quadriga Eurofighters is then scheduled to begin in the course of 2027.
FCAS (Future Combat Air System)
As a member of the German FCMS GbR (FCMS = Future Combat Mission System) consortium, HENSOLDT has been awarded a contract worth approximately 100 million euros by the French procurement authority DGA for the development of demonstrators in the core competence fields of radar, reconnaissance and self-protection electronics, optronics and also the overarching networking of sensor technology.
In the FCAS programme, Germany, France and Spain are developing a successor system for the Eurofighter and Rafale fighter aircraft, as well as a novel system of networked sensors. Sensor solutions provider Hensoldt has received a contract to support the Future Combat Air System (FCAS) programme, a joint effort between France, Germany and Spain. With an estimated value of approximately €100m, the contract has been awarded by the French Defence Procurement Agency.
FCAS is currently the largest European defence program and none of the participating nations either can or is willing to carry out a programme of this magnitude and importance alone. FCAS is at the heart of this vision. The participating countries are seeking to jointly develop a system that will far surpass the capabilities of any known combat aircraft and guarantee Europe's defensive capabilities.
Main Ground Combat System (MGCS)
While FCAS addresses the sky, MGCS addresses the ground. Germany and France are jointly developing the successor to the Leopard 2 and Leclerc main battle tanks. Hensoldt's optronics and sensor integration capabilities position it for significant participation in this program, which represents a multi-decade opportunity.
IX. Leadership & Culture
Thomas MĂĽller: The Foundation Builder
Thomas MĂĽller has led today's HENSOLDT AG as Managing Director since January 2015 and as CEO since the IPO in September 2020. Previously, he was Managing Director of Airbus DS Electronics and Border Security GmbH, having held numerous management positions in what is now Airbus Group, such as for the defence electronics sector in the Airbus Defence and Space Division and at the former subsidiary Astrium Satellites, which specialized in military and civil space systems. He began his career with the Bundeswehr in 1978, leaving in 1991 as a captain.
Müller's military background—thirteen years in the Bundeswehr, rising to captain—gave him an unusual combination of skills: he understood both what soldiers needed from their equipment and how to navigate complex defense procurement bureaucracies. His subsequent career at Airbus provided the industrial and corporate experience to execute a complex spinoff and IPO.
Oliver Dörre: The Growth Leader
Taufkirchen, 21 March 2023 – Oliver Dörre (53) will succeed Thomas Müller (64) as Chairman of the Management Board of HENSOLDT AG. Oliver Dörre will initially join the Management Board as an additional member no later than 1 January 2024. Upon resignation of Thomas Müller, expected for 1 April 2024, a few months before the regular end of his term, Oliver Dörre will take over as Chairman of the Management Board.
Oliver Dörre is a graduate in computer science and has been, since 1 January 2021, CEO and Chairman of the Executive Board of Thales Germany, where he has formerly served as VP Sales & Marketing / Key Account Executive from the end of 2016 until the end of 2020. Oliver Dörre has an outstanding track record of building strong product pipelines and is highly experienced in bringing innovation to the market.
Dörre holds a degree in computer science and worked as a general staff officer in the German Air Force from 1988 to 2010, most recently as a policy officer with a rank of lieutenant colonel in the planning department of the German Defence Ministry. He held several management roles at the tech firm Frequentis before joining Thales in 2015, and then becoming CEO of Thales Germany at the start of 2021.
Dörre's combination—software engineer and ex-military officer with the rank of Oberstleutnant der Reserve—is precisely what Hensoldt needs for its "software-defined defense" transformation. His experience running Thales Germany means he understands exactly the kind of company Hensoldt aims to become.
From 1988 to 2010, Dörre worked as a general staff officer in the German Air Force, most recently as a policy officer and deputy head of department with the rank of lieutenant colonel i.G. in the planning department of the Ministry of Defence.
Workforce and Culture
The company's 6,907 employees (as of 2023) skew younger than you might expect for a defence contractor - average age has dropped from 46 to 44 since 2017, no small feat when your existing employees are aging every year. Two-thirds of them own shares in the company, which tells you something about both employee belief in the mission and management's alignment of incentives.
Two-thirds employee ownership is striking for a company of this size. It suggests deliberate effort to align employee and shareholder interests—and perhaps explains the intense weekend efforts to get radars to Ukraine when they were needed.
X. Porter's 5 Forces Analysis
1. Threat of New Entrants: LOW
The constant innovation creates high barriers to entry. You can't just start manufacturing military-grade radar systems in your garage.
The barriers extend beyond technology. Security clearances take years to obtain. Institutional relationships with defense ministries develop over decades. The classified nature of many programs means new entrants can't even learn what capabilities are required.
2. Bargaining Power of Suppliers: MODERATE
Defense electronics requires specialized components—gallium nitride for AESA radar arrays, precision optics for targeting systems, hardened semiconductors that can survive battlefield conditions. Hensoldt's 125-year heritage of German industrial relationships provides some protection, but semiconductor supply chains remain a concern.
Hensoldt's Belz also emphasized the importance of supply chains. His company has made new investments in logistics, building a new warehouse and distribution center. This would have been unthinkable in the past, as the company would order components as they became necessary for the fulfillment of contracts. Now, it maintains stocks of crucial parts.
3. Bargaining Power of Buyers: LOW-MODERATE
Government buyers face budget constraints but have limited alternatives for sovereign capability. The German government's 25.1% ownership stake creates alignment rather than adversarial negotiation. This home-field advantage in Germany, combined with their strategic shareholders, creates the kind of competitive position that makes investment committees write long memos.
Long-term programs create switching costs. Once a military has trained its personnel on Hensoldt systems and integrated them into doctrine, switching to competitors becomes extremely costly.
4. Threat of Substitutes: LOW
There is no substitute for sensor-based situational awareness in modern warfare. Software can enhance but not replace physical sensors. Drones might change how sensors are deployed but increase the total market for sensor systems rather than substituting for them.
5. Competitive Rivalry: MODERATE (within defined boundaries)
The second level is political-industrial competition. Defence procurement involves a complex dance of national interests, industrial policy, and military requirements. Having Leonardo as both competitor and 22.8% shareholder illustrates this dynamic. They compete in some markets and collaborate in others.
Hensoldt competes with Thales, Leonardo, Saab, and Elbit Systems at the European level. But defense competition is different from consumer markets—it's shaped by industrial policy, national security considerations, and intergovernmental relationships as much as by price and performance.
XI. Key Performance Indicators for Investors
For investors tracking Hensoldt, three metrics matter most:
1. Book-to-Bill Ratio This measures order intake relative to revenue. A ratio above 1.0 indicates growing demand. Book-to-bill ratio improves to 1.3x (previous year: 1.1x)
A sustained book-to-bill above 1.2x signals that Hensoldt is winning contracts faster than it can execute them—a positive indicator for future revenue growth.
2. Order Backlog The total value of contracted but unexecuted orders provides visibility into future revenue. With an additional order intake of over € 2.9 billion, we now have a record order backlog of over € 6.6 billion, which provides us with excellent visibility on revenues for the coming years.
In the first nine months of fiscal year 2024, the order backlog amounted to EUR 6.5 billion, which is equivalent to a very high level of revenue visibility. For 2025, 86% of the forecast revenues are already covered by the existing order backlog.
3. Adjusted EBITDA Margin (before pass-through business) Pass-through business involves products Hensoldt resells without significant value-add. The adjusted margin excluding this business shows underlying operational profitability. At 19.4%, the EBITDA margin excluding pass-through business exceeded expectations (guidance: 18-19%).
XII. Guidance and Outlook
Oliver Dörre, CEO of HENSOLDT, says: "The world continues to be characterised by a multitude of conflict hotspots, and Europe in particular needs to sustainably expand its defence capabilities. The demand for sophisticated electronic defence and security solutions such as those offered by HENSOLDT will continue to grow in the coming years. This is reflected in our very high order intake in the 2024 financial year, which significantly exceeded our expectations. Our European partner countries made a significant contribution to this with around 40%. At the same time, we are progressing as planned with the implementation of our "North Star" strategy. Overall, we are ideally positioned to achieve our ambitious target of EUR 5 billion in revenue by 2030."
Looking ahead, the company forecasts revenue between EUR 2,500 and 2,600 million for the 2025 fiscal year, with a projected book-to-bill ratio of around 1.2x. Profitability is expected to be reported as an adjusted EBITDA margin of approximately 18%, translating to an adjusted EBITDA margin before pass-through business of 19%.
Oliver Dörre, CEO of HENSOLDT, says: "Defence spending in Germany and Europe continues to gain momentum and the Zeitenwende 2.0 is beginning to have a tangible impact. This is not only reflected in our order books, but increasingly in our production sites as well. We are thus taking responsibility for Europe's defence capabilities. As a reliable partner to our customers, our focus is now on meeting the growing demand with maximum efficiency and quality."
XIII. Investment Considerations
Bull Case
The bull case rests on structural tailwinds that appear likely to persist for years:
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European rearmament is structural, not cyclical. The €100 billion German special defense fund is just the beginning. NATO's 2% GDP spending target is increasingly seen as a floor, not a ceiling.
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Hensoldt owns the German home market. Two simple facts explain the premium valuation. First, Hensoldt gets 60% of revenue from Germany during the largest defence modernization in generations.
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The order backlog provides exceptional visibility. With €6.6 billion in contracted orders and 86% of 2025 revenues already covered, the company can plan investments with confidence.
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The ESG acquisition accelerates the transition to solutions. System integration capabilities enable higher-margin, stickier customer relationships.
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Management has both military and technology DNA. CEO Dörre's combination of computer science background and military staff experience positions the company for software-defined defense.
Bear Case
The bear case centers on execution risk and political uncertainty:
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Production scaling is challenging. Hensoldt's TRML-4D radar production is scaling from 2 to 18 units annually. This tenfold increase in just a few years requires workforce expansion, supply chain development, and quality control systems that take time to mature.
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Government budget priorities can shift. While current trends favor defense spending, political changes—in Germany or across Europe—could redirect funds to other priorities.
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Competition from larger players. Thales, Leonardo, and BAE Systems have deeper pockets and broader capabilities. A consolidation push by larger European champions could pressure Hensoldt's market position.
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Valuation reflects significant optimism. The stock has risen substantially from its IPO price, meaning future growth is already partially priced in.
XIV. Conclusion: Germany's Eyes and Ears
Hensoldt's trajectory from Airbus orphan to national champion offers a masterclass in strategic positioning. The company benefited from exceptional timing—the KKR acquisition preceded the Zeitenwende by five years, giving management time to prepare for an opportunity no one anticipated. But timing alone doesn't explain Hensoldt's success. The company inherited 125 years of institutional knowledge in precision optics and radar technology. It attracted leadership with the rare combination of military credibility and corporate sophistication. It secured ownership structures—the German government and Leonardo as anchor shareholders—that provide stability while maintaining public market discipline.
The TRML-4D radar's performance in Ukraine proved that German engineering still matters in the hardest possible test. And the ESG acquisition signals that management understands how defense markets are evolving—from component sales to integrated solutions.
Hensoldt, meanwhile, is scaling up its radar production significantly, aiming to manufacture up to 1,000 units annually by 2027. The company acknowledges that Ukrainian contracts play a key role in sustaining this expansion, underscoring the strategic importance of Ukraine as both a client and a real-world testing ground for advanced air defense.
For investors, the key question is whether Hensoldt can continue converting geopolitical tailwinds into profitable growth. The €6.6 billion backlog provides years of revenue visibility. The transition to solutions promises margin expansion. And the structural drivers—European defense spending, air defense prioritization, and the ongoing Ukraine conflict—show no signs of abating.
Hensoldt isn't a cheap stock by traditional defense metrics. But then again, it isn't a traditional defense company. It's a technology company that happens to serve defense markets, with R&D intensity of 20% and a transformation roadmap toward software-defined systems. The German government bet €330 million that this company was strategically essential. Ukraine is betting its cities on Hensoldt radars. The market will ultimately judge whether those bets were wise—but the early returns look promising.
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