The M&A landscape in A&D tells a story of strategic positioning amid robust growth. According to LSEG, worldwide A&D M&A deal announcements increased by 41% in 2025 to an all-time high of 532 transactions, while aggregate deal value surged by 60% to $42.7 billion. Early 2026 data suggests deal momentum is continuing to build, with worldwide M&A volume and value up 37% and 166%, respectively, in Q1 compared with the same period last year. Europe in particular is emerging as the engine of A&D M&A growth, outpacing North America, as investors anticipate European rearmament.
The momentum that began building in 2025, the geographic distribution of activity and the thematic concentration of deal flow all point to where sophisticated capital is being deployed and why.
North American targets commanded the highest share of worldwide deal value in 2025, accounting for 155 transactions worth a combined $28.1 billion More strategically significant for investors seeking stability and long-term growth, however, is Europe: deal volume in 2025 increased by 34% to 134 transactions and $8.7 billion in reported value – a 320% increase over the prior year. In Q1 this year, Europe has already recorded deals worth more than half the total for 2025 as a whole.
Seven mega-deals (with a transaction value of $1 billion or higher) totaling $24.3 billion were announced in 2025, compared to 5 mega-deals with a value of $15.3 billion in 2024.
Mega-deals: PE investors dominate
Private equity acquirors were behind the three largest transactions of 2025 and also accounted for over half of aggregate mega-deal value.
2025’s biggest deal was the $10.6 billion carve-out of Boeing’s digital aviation solutions business by Thoma Bravo, the world’s largest software-focused investment firm. The deal is notable not only for its scale but for what it signals: one of the world’s largest A&D manufacturers divesting a software asset to a specialist technology investor reflects the broader industry trend toward specialization and the standalone valuation of software capabilities in A&D, increasingly treated as distinct assets rather than embedded divisions of A&D primes.
The second-largest transaction was the $2.9 billion take-private of US-based Triumph Group, a designer, manufacturer and servicer of A&D components and systems, by Warburg Pincus and Berkshire Partners. Triumph shareholders received $26 per share in cash – a 40% premium over the company’s unaffected share price – reflecting strong buyer conviction in the structural growth of demand for mission-critical A&D components.
The third-largest deal was the $2.6 billion carve-out of UK-based Smiths Group’s threat detection and security screening business by CVC.
Supply chain: The dominant M&A theme
The single most active deal theme in A&D M&A during 2025 was supply chain, with transactions in this category totaling approximately $14.6 billion. The strategic logic is compelling: as governments urgently scale up defense procurement, the constraints on production capacity are overwhelmingly located in the supply chain rather than at the prime contractor level. Investors who understand this dynamic are acquiring the precision engineering, specialty materials and advanced manufacturing capabilities that will be the bottleneck – and the value capture point – in the coming procurement surge.
In addition to the Triumph Group deal, the most significant transactions illustrate this thesis. Arcline Investment Management entered a $2.2 billion definitive agreement to acquire Novaria Group, a provider of precision A&D components and specialty manufacturing processes, from KKR. Howmet Aerospace announced a $1.8 billion acquisition of Consolidated Aerospace Manufacturing from Stanley Black & Decker. TriMas signed a $1.5 billion definitive agreement to sell its Aerospace segment to Blackstone and Tinicum. Each of these transactions reflects a conviction that engineered components and specialty processes – the unglamorous but essential foundation of defense production – will be disproportionate beneficiaries of the coming procurement cycle.
Space and AI: The growth vectors
Space systems and AI represent the two investment themes generating the greatest deal velocity in the early part of 2026.
For space, the strategic context is clear: the new space race is intensifying, commercial and military space activities are converging, and the 299 mergers and acquisitions in the space industry recorded by GlobalData between 2020 and 2025 represent only the early stages of what is likely to be a sustained consolidation wave. While not all these deals are necessarily related to military space systems, all represent high-tech output in this segment, and many carry dual-use potential for both civil and defense applications. Firms operating across the whole industry, from satellite manufacturers to analytics-focused companies, went public via SPACs in 2021 – including Rocket Lab, in a merger with Vector Acquisition, and Spire Global, which makes small satellites for weather forecasting and maritime vessel tracking. The $2.6 billion acquisition of ARKA – a space and defense technology company – by CACI International from Blackstone was the largest space-specific deal of 2025 and reflects this dynamic directly.
Onebrief raised $200 million in January 2026 to acquire Battle Road Digital, which develops gaming technology for defense and national security simulation and training – a transaction that strengthens Onebrief’s AI-powered military resilience platform, AI Assist. In March 2026, Gaxos.ai acquired a 19.99% stake in America First Defense, a developer of advanced systems for air and land drones, for $2.9 million. The same month, Israeli defense technology company Kela Technologies acquired AI startup Pelanor – valued at $20 million to $30 million – whose platform uses AI to closely monitor and reduce costs relating to cloud computing. Each of these transactions reflects the emerging deal thesis: domain-specific AI with a clear operational or commercial use case and an established or developing institutional customer base.
A February 2026 BoAML/TS Lombard survey of fund managers registered a net 30% who are concerned about corporate overinvestment in AI, reflecting a broader market anxiety about the gap between AI’s hyped potential and its demonstrated commercial returns. This concern is legitimate in the context of general-purpose large language models, but it does not apply uniformly to the defense sector. At present, the most effective uses of AI are in clearly defined use cases and domain-specific applications rather than catch-all generative AI – and the deal activity in early 2026 reflects this distinction.
Discover further insights
To learn more, download The future of aerospace & defense: insights for investors & M&A dealmakers, published in association with Sterling Technology – the provider of premium virtual data room solutions for secure sharing of content and collaboration for the investment banking, private equity, corporate development, capital markets and legal communities engaged in aerospace and defense M&A dealmaking and capital raising.
