IN Brief:
- Forty-two defence transactions completed in the first half of 2026, up 56% from 27 a year earlier.
- Aggregate value remained broadly stable at £2.7 billion, indicating a greater number of smaller technology-led deals.
- Buyers are pursuing intellectual property, specialist employees, test data, facilities, and qualified manufacturing capability.
Global defence mergers and acquisitions reached a half-year record during the first six months of 2026 as investors and established manufacturers pursued artificial intelligence, autonomous systems, drones, cyber, space, and maritime technology.
Forty-two transactions completed during the period, a 56% increase from the 27 recorded in the first half of 2025. Aggregate value remained broadly stable at £2.7 billion, compared with £2.8 billion a year earlier.
Rising volume alongside flat value indicates that activity has been spread across a larger number of relatively focused transactions rather than dominated by a small group of major corporate combinations.
Recent investments include AE Industrial Partners’ $845 million acquisition of a controlling interest in the Space Propulsion and Power Systems business of L3Harris Technologies. Impulse Space raised $500 million to develop highly mobile spacecraft, while Allen Control Systems secured a $200 million Series B round at a $2.2 billion valuation.
Helsing raised $1.8 billion at an $18 billion valuation, providing further capital for artificial intelligence, autonomy, weapons, and manufacturing expansion.
Its planned HX-2 loitering-munition production in West Virginia illustrates the connection between finance and physical output. Valuations provide the capital to expand, but defence customers eventually require factories, suppliers, qualified equipment, and dependable delivery schedules.
“Defence technology is now one of the most attractive investment sectors globally, and this record level of M&A activity reflects that shift,” said Daniel Turgel, co-head of White & Case’s Global Technology Industry Group.
Rising government budgets provide a strong demand signal, while established defence companies face pressure to absorb technologies developed outside their conventional platform businesses. Buying a specialist can provide engineering teams, intellectual property, prototypes, customer relationships, and test data faster than building the same capability internally.
Deal volume reveals what buyers are seeking
The stable aggregate value suggests that buyers are targeting specific capabilities rather than pursuing consolidation only among major contractors.
A small autonomy company may own software and operational data that would take years to recreate. A propulsion business can control qualified motor designs, test facilities, and employees needed across several missile or spacecraft programmes.
Sensor specialists may possess manufacturing processes whose future value is greater than their present revenue. Cyber companies can bring security clearances, software tools, and access to government customers that are difficult to obtain organically.
Traditional valuation methods struggle with businesses whose technology is advanced but production remains immature. Revenue may be modest during development, while qualification, testing, and factory investment delay profitability.
Buyers are therefore paying for future access to defence programmes and for the development time saved through acquisition. High valuations can outrun industrial performance when a company has demonstrated a prototype but lacks a stable supply chain.
Manufacturing thousands of systems requires different disciplines from building dozens. Quality control, process engineering, inventory management, working capital, facilities, training, and supplier development become central as order volume rises.
Acquirers must choose whether to integrate the target into established corporate processes or preserve operational independence. Full integration provides purchasing power, compliance systems, security infrastructure, and customer access, but can slow decisions and weaken the culture that produced the technology.
Keeping the company separate can retain speed while duplicating support functions and limiting access to the parent’s factories. The correct structure depends on whether the acquisition centres on software, hardware, personnel, customer access, or production assets.
Due diligence reaches the production floor
Technical diligence now extends well beyond patents and demonstrations. Buyers need to understand component sources, export restrictions, security controls, test evidence, data rights, manufacturing yields, and dependence on individual employees.
A company may own an attractive design while relying on one overseas component without an approved substitute. Software developed under government funding may carry restrictions that limit reuse with another customer.
Prototype equipment can perform successfully after being assembled by engineers using methods unsuitable for volume manufacture. Tooling, process documentation, inspection equipment, and qualified suppliers therefore influence transaction value alongside intellectual property.
Government scrutiny adds another layer. Defence acquisitions can trigger foreign-investment review, export controls, security agreements, and restrictions on access to classified programmes.
Artificial intelligence, quantum technology, propulsion, and space systems often sit across military and commercial regulation. Minority investments and funding rounds allow capital to enter without immediately transferring complete control of sensitive technology.
The growing role of finance within the Aerospace Global Forum reflects the extent to which capital allocation and industrial capacity have become connected. Defence companies now compete for investors alongside government programmes.
Contract wins without sufficient working capital can strain a growing supplier as it purchases materials and expands ahead of customer payments. Investment without executable orders produces the opposite problem, encouraging companies to chase several programmes before engineering and production teams are ready.
Record transaction volume demonstrates confidence in future defence demand, but it also increases the likelihood of difficult integrations and valuations based on aggressive production assumptions.
The strongest acquisitions will shorten development, secure scarce skills, and improve delivery capacity. Weaker combinations may burden promising technology with corporate overhead or expose manufacturing gaps that were less visible during fundraising.
For manufacturers, the deal cycle is increasing the value of test facilities, production knowledge, qualified suppliers, and specialist employees. Those assets attract less attention than autonomous prototypes or artificial intelligence demonstrations, yet they decide whether technology can reach customers in useful quantities.
