Boston – September 15, 2026 -- Aerospace & Defense M&A deal value jumped 37% year-over-year in the first quarter of 2026 to $47.1 billion in disclosed enterprise value, according to Capstone Partners' annual Aerospace, Defense, Government & Security (ADGS) Industry M&A Report.
Full-year 2025 deal count rose 10.3% while disclosed enterprise value surged 73.1%
Aerospace & Defense M&A expanded throughout 2025 despite a volatile macroeconomic and geopolitical backdrop that dampened dealmaking elsewhere. Valuations averaged 3.0x EV/Revenue and 11.4x EV/EBITDA for the year, reflecting sustained buyer appetite across manufacturing, maintenance and leasing segments amid depressed aircraft production levels.
Revenue multiples climb to 4.8x in Q1 2026 as EBITDA multiples compress to 9.5x
The near-two-turn contraction in EBITDA multiples from full-year 2025 levels contrasted with a sharp rise in revenue multiples, pointing to growing demand for subscription-based government and security solutions and early-stage technology-enabled developers in aerospace and defense. Volatile fuel prices pushed low-cost carriers toward consolidation through the first quarter, while component manufacturing remained fragmented as strategics and sponsor-backed platforms pursued scale and geographic expansion.
FY2027 budget request lifts proposed defense spending to $1.5 trillion
A record FY2026 National Defense Authorization Act was followed by an even larger FY2027 President's Budget request, according to the White House. The Department of War reformed its acquisition process to incentivize inorganic growth and industrial-base investment, while an active Office of Strategic Capital and preference for commercial-off-the-shelf solutions provided funding lifelines to smaller defense technology developers.
Government contracting M&A pulled back sharply in 2025 before stabilizing in Q1 2026
The Department of Government Efficiency introduced uncertainty into federal contracting, compounded by the longest government shutdown in U.S. history. Acquirers responded by targeting companies with diversified revenue across federal and state, local & education government levels. Deal activity in this segment returned to stable growth in the first quarter of 2026.
AI-driven demand reshapes cybersecurity dealmaking
Security remained a top concern across physical and cyber domains through 2025 and into 2026. Urban law-and-order priorities and chronic law enforcement staffing shortages drove demand in physical security and uniformed guard services, while cybersecurity M&A centered on buyers seeking both AI-powered solutions and tools to secure sensitive data behind AI models and agents.
Capstone's report covers 14 sectors within the ADGS industry, including aircraft leasing, aircraft manufacturing, unmanned systems, C4ISR, electronic warfare, training and simulation, government services, cybersecurity, and security solutions.