Aerospace mergers and acquisitions at mid-year

Business advisory firm PwC released its “U.S. Deals 2025 midyear outlook for aerospace and defense” and not surprisingly, it reveals the global trend toward increased defense spending is spurring corporations and private equity (PE) to optimize business portfolios. Other areas where companies are investing include artificial intelligence (AI), cybersecurity, space, and supply chain resiliency.

Although deal volume and number were less in H1 2025 versus H2 2024, according to the report, aerospace and defense (A&D) deal value in H1 2025 is more than double the value of H1 2024 (about $20 billion vs. $9 billion), despite deals declining to half the number from the same period last year.

Companies are seeking to enhance operational efficiency and profitability by concentrating on core capabilities and high-performing segments, “to determine where investments should be made and where divestitures are warranted.”

Defense trends include the “Golden Dome” missile defense initiative – which could generate more than $175 billion in defense contracts during the next three years – driving demand for local production, modernization, and next-gen solutions. Additionally, PE is seeking divested corporate assets and struggling suppliers to assemble leaner portfolio companies capable of greater performance under private management.

Michelle Ritchie, PwC’s global industrial manufacturing deals leader, offers an update on the aerospace mergers and acquisitions roadmap from earlier this year.

“We see companies continuing to review their portfolio, and it’s been back to core capabilities and evaluating if there are things to dispose of and what strategic gaps do we need to fill,” Ritchie says. “Much of those areas are technology driven. They either must get scale because of their margins, or they have to exit the market.”

She explains consolidation most likely will be a mix of platform and the opportunity for growth. Platform in this instance is a business made up of smaller, similar firms combined into one company focused on the same capability. An example? “If you were a cybersecurity business, that would be your platform, and the roll-up would be adding companies doing the same, combining them to scale for the market,” Ritchie explains.

If the growth in deal making is in defense, what technology is driving it? Whether it’s drones, hypersonics, or something else, those who can supply it are going to be in high demand. Ritchie says, “They’re going to get the contracts, the revenue, and investors wanting to spend their money.”

I asked, “In what technologies are smarter companies investing to have that leverage?”

Ritchie replies, “They’re taking a digital approach, combining automation, AI, plus cybersecurity.”

The reason? “I’ve got to be able to automate my processes faster, I’ve got to use the knowledge and leverage the value coming from AI, and I’ve got to make sure it’s secure with my cyber. That is your trifecta,” Ritchie states. – Eric