UK defence sector M&A surges in first half of the year

The UK defence sector saw a record level of M&A activity during the first half of the year, with strong strategic and financial dealmaking, as buyers target high-growth areas of the market such as unmanned aerial vehicle (UAV) platforms.

A new report from investment and advisory firm Heligan Group found that there were 84 trade deals and 33 financial transactions in the UK defence sector during the first half of 2026.

Heligan Group also reported that there were a significant number of new platform investments from private equity firms, with deals including Evity Investment’s backing of Martin Precision, Sullivan Street’s investment in Zenix Aerospace and Growth Capital Partners’ investment in Security HQ.

These portfolio investments will be used to grow via M&A, with Heligan Group noting that some have already completed bolt-on acquisitions, despite their investments having just recently been finalised.

Matt Croker, corporate finance partner at Heligan Group, commented: “The upward trend of deals across the UK defence and national security industry is expected to continue into the second half of 2026 and [into] 2027 as the market is repricing defence and national security businesses.”

“The dual-track processes between private equity and trade buyers are now standard, and valuations in contested processes are increasing as financial buyers are willing to compete with acquirers. Private equity is now outbidding trade in many processes and institutional capital in defence and national security has never been greater.”

With valuations in the sector continuing to trend upwards, a number of European defence-linked firms have seen significant growth over recent years. As the likes of the EU and Germany agree to increase defence spending, several investment managers have launched defence-focused funds.

In the UK, former Secretary of State John Healey - who left that post earlier this year citing the need for credible defence spending increases - has been appointed as Chancellor by new Prime Minister Andy Burnham. This has been interpreted by some as a sign that increased defence spending could be a priority for the new administration.

The majority of funding during the first half of 2026 was directed towards UAV platforms, according to Heligan Group. Greater M&A activity is expected in the UAV market, which has played a major role in the Russia-Ukraine war, as companies backed by venture and growth capital investment having emerge as innovative, high-growth targets.

Other areas of the market identified as drawing acquisitive interest maritime electronic systems businesses (albeit Heligan Group notes that acquirers are finding fewer targets than expected) and law enforcement technology.

Summing up the trends that had defined H1 2026, Matt Croker said that there had been “a significant shift in activity”, with private debt funds actively moving to enter the UK defence market and interest and deal activity across private equity more broadly increasing year-on-year.

He continued: "The defence and national security market is repricing with valuations increasing, but this fundamental change is still early in its cycle. Capital follows capital, and now that the Defence Investment Plan (DIP) has finally been released, a further step-up in M&A and investment activity is a near certainty.”

A rising number of private equity-backed UK businesses are targeting overseas growth through international acquisitions

Share this article

Latest Businesses for Sale

---

---

---

View more businesses for sale