Private equity activity in the European defense sector is structurally higher than in the past decade.
The European M&A market is showing strong recovery. Within this broader revival, defense is emerging as one of the most active segments. The average deal volume over the past five years is nearly 100% higher than in the previous five-year period, making defense one of the fastest-growing industrial niches.
Venture activity in the sector is also accelerating. The average volume of European defense-related venture deals has nearly quadrupled over the past five years compared to the previous period. New technology companies in areas such as AI, autonomous systems, and aerospace are attracting more capital.
At the same time, major defense companies are scaling up through acquisitions. The STOXX European Aerospace and Defense index rose by 74% in 2025, increasing financial capacity for strategic acquisitions. European prime contractors are leading cross-border transactions, while American players are strengthening their positions in Europe primarily through partnerships.
According to Massimo Sabella, Aerospace & Defense lead at Bain, the increase in deal activity is directly linked to policy choices: "The increase in defense budgets in response to geopolitical threats is translating into more investments, higher deal volumes, and a clear acceleration of consolidation. The numbers show where the market is heading—nearly a doubling of private equity deal volume and a quadrupling of venture deals. Defense has thus grown into a core segment within the European M&A market."
