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Capstone Partners Reports Positive Aerospace and Defense M&A Trends

On July 16, 2025, Capstone Partners released its annual report detailing the mergers and acquisitions (M&A) within the Aerospace, Defense, Government, and Security (ADGS) sectors. The findings revealed impressive growth in M&A activities within the U.S. Aerospace and Defense industries, even outpacing the overall market performance.

According to Capstone’s analysis, the deal activity in the Aerospace and Defense sector surged in 2024, showcasing an increase that stands high above the general M&A landscape. The report noted that sector public company earnings growth not only exceeded overall market expectations but also demonstrated robust year-over-year (YOY) improvements. Specifically, the sector index's EBITDA rose by 14%, compared to an 11% increase across the widely monitored S&P 500 index.

Simultaneously, sector shipments saw an 8% YOY growth, surpassing pre-pandemic levels. This remarkable turnaround is largely attributed to the resurgence in global commercial air travel following the pandemic, indicating a solid recovery trajectory.

While Capstone’s optimistic outlook on earnings growth was evident, several challenges loom over the horizon. Emerging economic concerns have begun to cast a shadow, particularly the slowdown in new commercial aircraft orders and production obstacles that could hinder sustained growth.

One of the most notable highlights from the report is the revival in M&A volume, which also observed a 15% YOY increase. This growth trajectory is notably higher than the 3% recorded across all industries in North America, pointing toward a sustainable rebound in the aerospace and defense sectors. Notably, valuation multiples stayed stable throughout 2024, with slight increases observed in both M&A transaction multiples and public trading multiples.

However, it is critical to note that industry deal multiples appear to have peaked, particularly within the $500 million to $1 billion enterprise value range, suggesting that while enthusiasm reigns, there may be a need for tactical reassessment moving forward.

Capitalizing on a broad pool of equity capital, sponsors have augmented their involvement in the Aerospace and Defense markets, culminating in a significant share of ongoing deals. This challenge is buoyed by abundant dry powder reserves that remain ready for deployment into the sector as 2025 approaches. Most of this liquidity is concentrated within the U.S., highlighting the country’s paramount role within the industry.

Looking ahead, Capstone predicts that the Aerospace and Defense industry will likely exhibit resilience despite macroeconomic headwinds such as federal budget cuts, fluctuating tariffs, and high interest rates. Strong fundamentals among companies in these sectors are expected to continue attracting keen interest from both strategic and financial acquirers alike.

Encouraging trends within relevant market dynamics further bolster this optimistic projection. The burgeoning demand for air travel and new commercial aircraft combined with an aging global fleet, rising cybersecurity concerns, and ongoing geopolitical tensions indicates robust and sustained demand for Aerospace and Defense products and services.

Key Insights from the Report

In addition to the above findings, the report extensively discusses various integral aspects of the sector, including:

• - Commercial Aerospace: Achieving substantial highs in 2024, although warning signs lay ahead for 2025.
• - Defense Budget Increases: The President's budget proposal seeks a notable 13% rise in Defense spending.
• - Cybersecurity Opportunities: Strong fundamentals and stable transactions in the cybersecurity market signal promising ventures.
• - Training and Simulation: Advancements in technology are set to benefit training and simulation areas significantly.
• - Resilience in M&A Activity: Sustained activity in the ADGS sector emphasizes the enduring strength of the market despite potential headwinds.

This report serves as a vital compass for industry stakeholders, offering not just a retrospective analysis of market movements but also forecasts for a dynamic landscape that continues to prototype innovation and growth within the Aerospace and Defense fields.

To explore the complete report, visit Capstone Partners.