M&A transaction volume held firm across aerospace, defense and government in Q3 2026, as surging defense sector dealmaking and a sequential uptick in the government sector helped offset a normalization in aerospace transactions following Q2's record volume.
As global threat landscapes evolve and industrial base constraints persist, capital allocators are aggressively targeting multi-domain autonomy, counter-UAS, specialized energetics and core supply chain resilience.
Highlights and key industry themes
- Defense tech acceleration: Defense deal volume surged to 31 transactions (+48% QoQ), driven by strong strategic and private equity appetite for autonomous systems and counter-UAS, alongside undersea capabilities, electronic warfare and mission-critical electronics
- Supply chain insourcing: Aerospace OEMs are pivoting from outsourcing to direct vertical integration (e.g., GE Aerospace acquiring CPP) to protect production ramp rates and mitigate raw material bottlenecks
- Direct DOD equity injections: The U.S. Department of Defense is increasingly leveraging direct equity, warrants and preferred stock investments, paired with multi-year purchase guarantees, to secure vulnerable defense industrial base suppliers
- Regulatory shift ahead: A proposed SBA size standard overhaul could raise the IT services small business threshold from $34 million to $531 million, fundamentally altering mid-tier market eligibility and M&A strategies
Q3 2026 median valuation multiples
- Aerospace sector: 15.2x
- Defense sector: 12.5x
- Government sector: 9.1x
Key questions answered in the full report
- Where are public market valuation multiples settling across aerospace, defense and government sectors heading into Q4 2026?
- What are the complete transaction details and trends affecting the aerospace, defense and government sectors and how are those drivers expected to impact M&A activity?
- What were the top M&A transactions in Q3 2026 and how do they illustrate the broader trends across the industry?
Access our aerospace, defense and government market analysis
Read the full report to access detailed transaction logs, public trading comps, sector breakdown analyses, and expert commentary from our senior investment banking team.
