Defence & National Security M&A

The Defence and National Security M&A market is undergoing fundamental change, and it is repricing faster than anyone expected. The thesis we set out in early 2026, a structurally undervalued, capital‑starved and fragmented sector on the cusp of a step‑change has not only held but compressed in timing.

H1 2026 was a record period for M&A activity, with unprecedented investor interest. Private Equity is now competing hard and frequently outbidding trade buyers and dual‑track processes are market standard, while prior‑year valuation benchmarks are largely irrelevant. If you were disappointed by a process 18–24 months ago, the market has moved.

Multiple forces are driving this but most notably sovereign capability and supply‑chain resilience have moved from preference to necessity and institutional capital has never been more available as banks reverse course and private debt enters the sector.  However, the DIP still leaves a significant funding gap, ministerial churn adds friction without reversing direction and SME financing challenges persist. Despite these ongoing challenges, none of this changes the direction of travel which is more M&A and at even greater valuations.

Subsectors such as cybersecurity (and adjacent services) will always have high levels of M&A but we expect maritime electronic systems, law‑enforcement technology (the most underpriced sub‑sector), UAV and counter‑UAS and precision engineering across defence and aerospace to experience much higher levels of M&A in 2026 than in previous years.

For most owners, if you are considering your strategic options the timing to act is good and we expect it to continue into H2 and 2027.