Aerospace, Defense & Government Q3 2025

Executive Summary

Valuation appetite held firm into Q3 2025. The last twelve months saw 122 transactions (24 in Q3) with median multiples of 17.82× TEV/EBITDA and 3.22× TEV/Revenue, reflecting persistent competition for IP-rich, defense-electronics and space-adjacent assets.

Commercial demand stayed resilient on international traffic strength and OEM ramp plans, while defense visibility benefited from sustained modernization priorities (hypersonics, C5ISR, space architectures).¹ ³ ⁶

Policy and budget narratives continued to shape market sentiment. However uncertainty abounds as, the Federal Government was shut down after Congress failed to pass a budget.

Mid-year outlooks highlighted robust funding pipelines and strong procurement tailwinds, with the “Golden Dome” missile-defense initiative emerging as a multi-year catalyst reshaping supply chains and portfolio strategies.¹ ² ⁴

At the same time, elevated defense spending and heightened activity across UAS, AAM, and space platforms reinforced deal momentum, even as labor shortages and supply-chain constraints persisted.⁶

Market Dynamics

Deals: 24 in Q3; LTM 122 (vs. 131 a year ago). Valuations: LTM medians 17.82× EBITDA / 3.22× revenue. Strategics leaned into vertical integration (sensors, avionics, thermal/structural) and space-ISR payloads; financial sponsors favored precision components/MRO roll-ups with sticky aftermarket. AAM remained thematically relevant, though near-term public-market exuberance cooled vs. H1; diligence increasingly weighs certification and unit-economics realism.¹ ³ ⁴ ⁵ ⁶

Buyer Landscape

Strategic Acquirers: 100 of 122 LTM deals (81.97%), plus 4 PE-backed strategics (3.28%)—activity concentrated in EW/autonomy, propulsion, avionics, and space hardware/services. 

Financial Buyers: 18 of 122 LTM (14.75%)—focus on precision machining, avionics MRO, and cyber/mission-engineering platforms positioned for bolt-on scale. 

Industry Comparison

Despite a lower LTM count vs. 2024, ADG valuation medians continued to outpace broader industrial cohorts, supported by backlogs, modernization funding, and resilient aftermarket. Mid-year credit and industry outlooks point to improving interest-coverage and easing rate headwinds—supportive for deal underwriting—though supply/labor constraints still elongate integration timelines.³ ⁴ ⁷ ⁸

Geographic Expansion

Top U.S. states by seller count (LTM): California (20), Florida (19), New York (6), Ohio (6), then Virginia (4), Washington (4), Texas (4). Cross-border participation remained healthy with buyers from India, Israel and the UK active in U.S. ISR/propulsion assets seeking NATO-compliant tech—consistent with mid-year outlooks.¹ ²

Notable Transactions

Largest Transactions Closed

Other Financial Buyer Transactions Closed

Other Strategic Buyer Transactions Closed

Emerging Trends

Key trends shaping Aerospace, Defense & Government M&A:

1. Defense Budget & Multi-Year Programs
   Mid-year reads emphasize sustained modernization (nuclear, hypersonic, space architectures) supporting visibility for primes and tiered suppliers.^{1 3}
2. “Golden Dome” Signal
   “Golden Dome” is a multi-year procurement catalyst which will be reshaping portfolios and supply chains as contractors position for missile-defense work.^{2 4 6}
3. Space-Enabled ISR & SDA
   Constellation build-outs and resilient comms/payloads remain high-priority, pulling through precision components, thermal management, and software-defined radios.^{1 3}
4. AAM Reality Check
   Capital still flows, but investor tone normalized after H1’s rally; certification/regulatory pathways (and unit economics) are gating factors for M&A theses.⁵
5. Supply-Chain Sovereignty
   On-shoring in magnetics, titanium, and PCB lines continues as OEMs de-risk critical inputs, steering carve-outs and specialty-manufacturing acquisitions.^{1 2 3}
6. AI-Enabled Sustainment
   Predictive-maintenance/digital-twin adoption supports tuck-ins across MRO/aftermarket and avionics—budgeted across 2025 enterprise programs.¹
7. Portfolio Realignment
   Corporate separations and non-core divestitures remain a key source of assets for strategics/sponsors executing platform + bolt-on playbooks.^{2 3}

Outlook for Next Quarter

Opportunities: Commercial traffic strength and OEM production normalizations should keep civil aero assets bid; defense platforms (C5ISR, hypersonics, space) retain multi-year demand signals.¹ ³

Risks: Labor/talent scarcity, materials tightness (e.g., titanium sponge), and the Federal Budget process, policies and tariff uncertainty can extend diligence and integration timelines; AAM certification slippage would temper euphoria.² ³ ⁵ ⁹

Predicted Activity: Continued cross-border bolt-ons in precision tooling, ISR payloads, and space electronics; sponsor-backed strategics to accelerate roll-ups to capture synergies into 2026.¹ ²

PCE Transactions

 

Served as advisor to Grant Aviation on their sale to Westward Partners

Served as advisor to Hop-A-Jet Worldwide Jet Charter as they became 100% ESOP owned

Served as advisor to Unique Electronics for senior debt refinancing

Served as advisor to Williams Electric Co., Inc. on their sale to Parsons

Served as advisor to Milcom Technologies for a fairness opinion

Served as advisor to Schwartz Electro-Optics, Inc. on their sale of Auto Sense to Osi Laserscan

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