Industry Report: Aerospace & Defense 1H 2025 [FOCUS]

Key Report Highlights

• M&A Activity Surges with Focus on Defense-Tech and AI
  M&A in Aerospace & Defense saw strong activity in H1 2025, with deal volume reaching 250 transactions, up from 175 in H2 2024. Strategic and private equity buyers are targeting mission-critical, tech-enabled firms, especially those offering AI, digital integration, and autonomous systems.
• Shift in U.S. Defense Priorities Boosts Drone and Missile Demand
  While the proposed $892B FY 2026 U.S. defense budget remains sizable, spending is shifting away from traditional aircraft like the F-35 toward drones, missile systems, and next-gen autonomous platforms. Firms in these areas—such as AeroVironment and Lockheed—are reporting record backlogs and earnings growth.
• Aerospace Components & Defense Stocks Outperform Market
  All tracked A&D segments outpaced the S&P 500 in H1 2025. Notably, the A&D Components Index rose 22.04%, and the Defense Index surged 33.5%, with public companies benefiting from aging weapons systems, new OEM orders, and NATO-aligned defense spend.
• Commercial Aerospace Rebounds on Aircraft Orders
  U.S. durable goods orders spiked 16.4% in May 2025, led by a 230% surge in commercial aircraft bookings (mainly Boeing). Aircraft delivery volumes are projected to meet or exceed H1 2024 levels, signaling a strong recovery in narrow- and wide-body segments.
• Cross-Border and Strategic Transactions Remain Active
  Recent deals include Lockheed’s $360M acquisition of Amentum’s Rapid Solutions, Redwire’s $925M purchase of Edge Autonomy, and Apollo’s $3.6B buyout of Barnes Group. Cross-border activity and satellite/space-related M&A also remained elevated as buyers seek autonomous, AI-enabled, and vertically integrated capabilities.

FOCUS Investment Banking is a national middle market investment bank providing M&A advisory, capital raising, and corporate finance services to privately held companies. Founded over 40 years ago, the firm specializes in advising lower middle market businesses—typically with $5 million to $300 million in revenue—across a broad range of industries including aerospace & defense, healthcare, technology, manufacturing, business services, and automotive.

With a team of seasoned professionals who bring deep operating and transactional experience, FOCUS delivers partner-led, tailored guidance on sell-side and buy-side M&A, growth capital, exit planning, and valuation services. The firm combines industry expertise with global reach through its affiliation with M&A Worldwide, offering access to international buyers and investors.

Headquartered in Washington, D.C., FOCUS also maintains offices in Atlanta, Chicago, Los Angeles, Miami, and Dallas. Securities transactions are conducted through FOCUS Securities LLC, member FINRA and SIPC.

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