On the offensive: The rise of M&A in European defense

By Manfred Hader, Stephan Baur, Andreas Grille and Dieter Atzwanger

Europe’s defense sector is undergoing a fundamental transformation as geopolitical tensions and the need for strategic autonomy drive a new era of investment and consolidation. European governments need to reassess their defense strategies, leading to a sharp increase in budgets and a renewed focus on building robust, future-ready capabilities. Defense spending among European NATO countries is projected to rise from USD 500 billion in 2025 to USD 800 billion by 2030, with Germany, the UK, Italy, and France leading the way.

This surge in spending is fueling rapid growth across all major defense segments - space, air, land, naval, effectors, and cybersecurity. As a result, company valuations have more than doubled since 2022, reflecting both the current order boom and the expectation of sustained demand. The urgent need to ramp up production is driving consolidation throughout the supply chain, as manufacturers and suppliers seek to expand capacity and reduce delivery bottlenecks. Non-defense companies are assessing the sector, trying to leverage their expertise and idle capacity to diversify and capture new growth opportunities.

At the same time, the push for European strategic autonomy is reshaping investment priorities. An increased focus on protecting core technologies and strengthening local supply chains leads to a rise of transactions and the emergence of national and pan-European defense champions. This trend is reinforced by growing uncertainty in US foreign policy and the desire to reduce dependence on external partners.

Innovation is accelerating, particularly in smart affordable mass technologies such as drones and autonomous systems. Start-ups specializing in these areas are disrupting the market with rapid development cycles and new business models, making them attractive acquisition targets for established defense companies. The resulting ecosystem is dynamic and agile, with both legacy players and newcomers pursuing vertical and horizontal integrations to secure innovation, scale, and supply chain resilience.

M&A activity in the European defense sector is at an all-time high, supported by strong capital availability, rising valuations, and a favorable market environment for both public and private investors. The landscape is evolving quickly, with new technologies, production ramp-ups, and strategic shifts creating opportunities and challenges for all stakeholders.

Register now to access the full study. Furthermore, you get regular news and updates directly in your inbox.