Aerospace, Defense & Government M&A Update

Executive Summary

Aerospace, defense, and government contracting M&A remained active through the third quarter of 2026, supported by strategic demand for differentiated technology and mission-critical capabilities. Seventeen transactions closed during the quarter, bringing LTM volume to 140 deals. Strategic buyers represented 85% of LTM activity, while financial buyers accounted for 15%. LTM median valuation multiples were 18.49x TEV/EBITDA and 3.97x TEV/Revenue, compared with 18.76x and 3.99x, respectively, in Q3 2025.

The quarter’s largest disclosed transactions were Ondas’ $829.9 million acquisition of DZYNE Technologies, Booz Allen Hamilton’s $720.0 million acquisition of Ultra Electronics Advanced Tactical Systems, and Iridium Communications’ $521.7 million acquisition of Aireon.¹³

“Companies that bring together national security, advanced manufacturing, and digital capabilities continue to stand out in the market,” said David Jasmund, Managing Director at PCE. “Buyers are looking beyond scale and focusing on capabilities that are difficult to replicate, especially when regulatory requirements, specialized expertise, and contract access create lasting competitive advantages.”

Market Dynamics

Although quarterly transaction volume moderated to 17 deals in Q3 2026, LTM activity remained substantial at 140 transactions. Valuations were also stable: median LTM multiples of 18.49x EBITDA and 3.97x revenue remained in line with Q3 2025 levels. This resilience reflects continued demand for differentiated aerospace and defense assets. Strategic acquirers pursued vertical integration, proprietary technology, and contract access, while financial sponsors concentrated on scalable platforms with recurring revenue, recompete visibility, and compliance readiness.¹³

Buyer Landscape

Strategic Acquirers: 119 of 140 LTM transactions (85.0%) were completed by strategic buyers. Activity centered on defense technology, aerospace sustainment, autonomous systems, space infrastructure, electronics, and mission-support capabilities. Buyers continued to prioritize proprietary intellectual property, cleared workforces, established customer relationships, and vertical integration opportunities.¹³

Financial Buyers: 21 of 140 LTM transactions (15.0%) involved financial buyers. Sponsors remained selective, favoring aerospace components, MRO, government services, and defense-adjacent technology businesses with durable cash flow, contract renewal visibility, and mature cybersecurity and compliance infrastructure.¹³

Industry Comparison

Aerospace, Defense & Government Contracting accounted for a small but meaningful share of U.S. M&A activity. The sector represented 17 of 2,300 U.S. transactions in Q3 2026, or approximately 0.74% of quarterly volume, and 140 of 13,708 transactions on an LTM basis, or approximately 1.02% of total volume. Activity continued to benefit from long-term defense priorities, mission-critical customer relationships, aerospace aftermarket demand, and high barriers to entry created by regulation, security clearances, and technical requirements.¹³

Geographic Expansion

LTM seller activity was led by California (23), Florida (11), Texas (11), Virginia (9), Maryland (6), and New York (6). These markets benefited from established aerospace manufacturing clusters, defense installations, MRO capacity, federal customer proximity, and concentrations of cleared technical talent.¹³

California remained the most active state, supported by its established aerospace manufacturing base. Florida and Texas continued to generate aerospace manufacturing, aviation services, and MRO transaction activity, while Virginia and Maryland remained important centers for defense technology and government contracting.¹³

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 Modernization Drives Capital Deployment
   Spending priorities continue to favor autonomous systems, missile defense, electronic warfare, and next-generation command-and-control capabilities. Buyers are increasingly targeting differentiated technologies that support future-force modernization rather than traditional labor-intensive contracting models.^{8 11 12 15}
2. Space Becomes a Core Strategic M&A Vertical
   Commercial and defense space capabilities continue to attract investor interest as launch, satellite, communications, and ISR platforms become more integrated into national security infrastructure. Buyers are pursuing both established providers and emerging technology platforms across the evolving space economy.^{8 14}
3. Cybersecurity and Compliance Differentiate Winners
   CMMC readiness, zero-trust security, and AI-enabled cyber capabilities have become increasingly important competitive differentiators. Contractors with mature cybersecurity infrastructure, strong compliance processes, and established contract access remain attractive acquisition candidates.^{3 4 9}
4. Subsector Spotlight: Defense Technology, Autonomy & Space
   Investment activity remained concentrated in autonomous systems, AI-enabled mission platforms, missile defense technologies, and space infrastructure. The DZYNE, Ultra Electronics ATS, and Astrobotic transactions illustrate buyer appetite for assets aligned with unmanned systems, defense electronics, and space capabilities.^{12 14 15}
5. Subsector Spotlight: Aerospace Manufacturing & MRO
   Persistent OEM backlogs and supply-chain constraints continue to support aftermarket maintenance, repair, and overhaul demand. Buyers remain focused on certified manufacturers and MRO providers with recurring demand, specialized technical capabilities, and critical supply-chain positioning.^{5 6 7 12}
6. Subsector Spotlight: Cybersecurity, Federal IT & Government Services
   Federal agencies continue investing in cloud modernization, cyber resilience, AI adoption, and digital mission support. Contractors with prime contract access, strong past performance, compliance infrastructure, and recurring customer relationships remain well positioned for buyer interest.^{2 4 9}

Outlook for Next Quarter

Deal activity is expected to remain active in Q4 2026, led by strategic consolidation across defense technology, aerospace services, and government contracting. Opportunities should remain strongest for companies with differentiated technology, mission-critical customer relationships, and exposure to autonomy, cybersecurity, space, and advanced manufacturing. Key risks include federal budgeting uncertainty, workforce constraints, evolving compliance requirements, limited contract diversification, and greater valuation scrutiny for subscale or less differentiated contractors.¹³

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

Contact Us

David Jasmund Orlando Office 407-621-2111 | Email me now READ MORE →

Michael Rosendahl New York Office 201-444-6280 | Email me now READ MORE →

Eric Zaleski Chicago Office 847-239-2466 | Email me now READ MORE →