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David Jasmund

E: djasmund@pcecompanies.com

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Industry Trends

Defense Sector Poised for AI and Space-Driven M&A Surge

The defense industry is set for increased acquisition activity as companies leverage growing cash reserves to invest in emerging technologies like artificial intelligence, advanced drones, and space systems. Rising global conflicts and the convergence of commercial and defense technologies are accelerating innovation, drawing interest from private equity and venture capital. This trend is reshaping the competitive landscape, fostering opportunities for smaller players with niche technologies and signaling the need for broader collaboration to address funding and operational gaps.1

Incoming Administration Signals Cost Control in Government Contracting

The Trump administration’s renewed focus on cost efficiency challenges government contractors to meet stricter requirements, including fixed-price contracts. This approach will pressure firms to avoid overruns while rewarding innovation in low-cost initiatives such as unmanned systems. With heightened oversight and results-driven mandates, the evolving environment could reshape strategies across the industry, driving operational improvements.2

NATO Spending Spurs U.S. Defense Opportunities

The increased defense budgets of NATO and EU nations present lucrative opportunities for U.S. aerospace, defense, and government contracting firms. As Western allies replenish stockpiles and modernize military capabilities, U.S.-based companies stand to benefit from contracts focusing on ammunition, vehicles, and high-intensity warfare systems. The new administration’s alignment with bolstering domestic defense efforts enhances prospects for broader industry participation in defense procurement.3

Lockheed Martin’s Acquisition of Terran Orbital Advances Modular Spacecraft Capabilities

Lockheed Martin’s $257M acquisition of Terran Orbital underscores a growing emphasis on modular spacecraft and rapid development in the aerospace and defense industries. By integrating Terran Orbital’s customizable satellite platforms with Lockheed Martin’s mission systems expertise, the deal highlights a shift toward scalable, automated manufacturing and advanced testing to meet diverse commercial, civil, and national security needs. This strategic move reflects the broader trend of defense companies investing in modularity and innovation to enhance responsiveness and competitiveness in the space sector.4

Astra Secures $44M DIU Contract for Rocket 4 Development

Astra has been awarded a $44 million Defense Innovation Unit (DIU) contract to advance its Rocket 4 launch vehicle, emphasizing mobile launch systems and production scalability. This investment highlights the U.S. government’s focus on responsive space capabilities, creating opportunities for other aerospace and defense firms to innovate within the growing space logistics market. Astra’s progress underlines the strategic importance of developing reliable, flexible solutions for national security and commercial space operations.5

Largest Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • Satcom Direct, Inc.
  • Gogo Inc.
  • $636.00
  • Terran Orbital Corporation
  • Lockheed Martin Corporation
  • $257.00

Other Financial Buyer Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • TurbineAero, Inc.
  • Snow Peak Capital, LLC
  • n/a
  • C Speed, LLC
  • NewSpring Capital, LLC
  • n/a
  • STS Aviation Group, Inc.
  • H.I.G. Capital, LLC
  • n/a

Other Strategic Buyer Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • Wyvern Technologies Inc.
  • Extant Components Group Holdings, Inc.
  • n/a
  • Aero Instruments & Avionics, Inc.
  • Aero Accessories & Repair Inc
  • n/a
  • Blu3, Inc.
  • Blue Evolution Inc.
  • n/a

 

Source S&P Capital IQ as of 1/17/2025 and PCE Proprietary Data

PCE Transactions

Contacts

David Jasmund

Orlando Office

407-621-2111 |

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Michael Rosendahl

New York Office

201-444-6280 Ext 1 |

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Eric Zaleski

Chicago Office

847-239-2466 |

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Data Assumptions

This report represents transaction activity as mergers & acquisitions, consolidations, restructurings and spin-offs. Targets are defined as U.S. Based companies with either foreign or U.S. based buyers. Transaction information provided is based on closed dates only.

Glossary

EBIT - Earnings Before Interest and Taxes
EBITDA - Earnings Before Interest, Taxes, Depreciation, Amortization
LTM - Last Twelve Months
TEV - Total Enterprise Value

Sources:

  1. 1. Pfeifer, Sylvia. "Defense Industry Set for Deal Surge as Companies Look to Expand in AI and Space." Financial Times, December 30, 2024.
  2. 2. Losey, Stephen. "Second Trump Presidency Could Mean Harder Line with Defense Industry." Defense News, November 18, 2024.
  3. 3. Gallardo, Cristina. "Rheinmetall Targets $21.2 Billion in Sales by 2027 as Defense Budgets Soar." The Wall Street Journal, November 19, 2024.
  4. 4. Lockheed Martin. "Lockheed Martin Advances Space Capabilities through Strategic Terran Orbital Acquisition." PR Newswire, October 30, 2024.
  5. 5. Foust, Jeff. "Astra Wins DIU Contract to Support Rocket 4 Development." SpaceNews, October 25, 2024.
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