Four defence themes Heligan is watching in 2026

Defence and National Security M&A is having a record year, with H1 2026 the busiest half-year the sector has seen and valuations continuing to trend upwards. Most of the commentary understandably gravitates towards Access Control and Secure-Comms, but several other sub-sectors are building momentum without attracting like the same pricing.

Some sectors will always be highly active from an M&A perspective, such as Cyber (particularly differentiated SOCs and threat intelligence) along with Access Control and Secure-Comms, but we thought we'd share some emerging M&A themes.

The themes we've highlighted below are areas with historically a little less M&A activity, but where we see opportunities going forward, and where we expect M&A volumes will exceed historical levels.

Maritime electronic systems

Underrepresented in most M&A commentary and, as a result, underpriced by sellers who do not know what they have. The focus on submarines and naval platforms has obscured the more commercially accessible opportunity: sonar processing, electronic warfare systems, underwater communications and maritime domain awareness. These capabilities are in acute demand across NATO allies. Typical M&A valuations are disregarded here given the current high demand for these capabilities.

Strategic acquirors are actively seeking maritime electronic systems businesses and finding fewer than they expected. Businesses with existing government relationships and exportable IP are attracting buyer interest and we expect much greater activity in this sub-sector.

Law Enforcement technology

The most underpriced sub-sector in the market currently but one of the most interesting. Everyone is discussing cyber and drones but the procurement wave in police technology modernisation is receiving a fraction of the attention it deserves.

Part of the reason is structural. Procurement is fragmented across local forces, making the cost of sale exceptionally high for many businesses, particularly those without an off-the-shelf product ready to deploy.

Recognition software, biometrics and digital forensics are all attracting increased buyer focus, driven by a legislative framework that is finally catching up with operational reality. Businesses with established police relationships, even at modest scale, are substantially de-risked as acquisition targets. They provide something a new entrant cannot buy in an established platform.

Defence and National Security supply chains have dominated the conversation. Law enforcement is catching up and the businesses that have quietly built a position in this market are going to find that the M&A interest arrives faster than they anticipated.

UAV technologies and supply chain

What began as a conflict of trenches and attrition has become a battlespace defined by drone technology: first ISR, then one-way effectors, and now drone-on-drone engagements for aerial dominance and freedom of movement over a geographic area. Capabilities are now emerging in months. The best innovation often happens in a time of need, not an abundance of finance and resources. Funding does help though...

Autonomous systems now account for up to 80% of battlefield losses in Russia-Ukraine and Ukraine's drone production (2.2 million units in 2024, rising to a 7 million target for 2026) highlights the direction of travel. That manufacturing base and the tactics built around it are now exporting into NATO procurement and commercial markets alike, which is why we expect growth to continue well beyond any single conflict.

The wider opportunity sits within the supply chain. UAV platforms have received the most funding, but counter-UAS technology is also where we see significant opportunity. Nobody has really mastered it yet but there are many interesting technologies developing. The dual-use theme of drones in Ukraine has provided significant innovation. Learnings from GPS-denied environments can be applied to the civilian market, such as how to fly a drone carrying urgent blood to a hospital. This also extends from composite manufacturing to more advanced electrical systems.

We expect much greater M&A activity in this sector going forward, as companies that have received venture and growth capital funding emerge as highly innovative, high-growth businesses.

Precision engineering across defence and aerospace supply chains

Record order books, sovereign supply chain pressures and raw material bottlenecks are creating ideal M&A conditions for precision engineering and engineering design companies operating across Defence and Aerospace.

Primes cannot deliver on funded programmes without securing their supply chains and this is creating record order books. Change of control is often cited as a risk in M&A, but in this sector the dynamic is increasingly reversed. Customers with a critical dependency on a specialist provider frequently welcome the arrival of a larger, better-capitalised acquirer, one with the balance sheet to invest in capability, headcount and infrastructure in a way the incumbent could not. Being acquired by the right buyer is therefore not necessarily a threat to customer relationships.

Themes like these are a recurring feature of the current Defence and National Security M&A market. Heligan's Defence and National Security team works with business owners across these sub-sectors to understand how buyers are likely to value their business and structure a transaction well ahead of any process. Get in touch to discuss what this could mean for your business.