Resurgent: UK defence M&A hits record pace

November 2026  |  FEATURE | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

November 2026 Issue

Despite decades of underinvestment resulting in severe structural bottlenecks, supply-chain attrition and defence programmes running behind schedule or over budget, the UK defence sector is experiencing a resurgence.

Pivoting sharply toward record-breaking M&A activity, H1 2026 saw private equity (PE) and trade buyers aggressively reprice and consolidate sovereign UK defence capabilities, driven by shifting geopolitical threats and the release of the UK government’s Defence Investment Plan (DIP).

Long awaited, the DIP, published by the Ministry of Defence on 30 June 2026, sets out £298bn of defence spending over a four-year period. The spending trajectory targets approximately 2.7 percent of gross domestic product by 2027-28, rising to almost £80bn annually by 2029.

“UK defence has a focus on ‘war readiness’ and ‘resilience’, and companies contributing to these guiding principles will have an important role to play,” says Matt Croker, corporate finance partner at the Heligan Group. “With UK government policy leaning toward dual-use, recognition of the wider UK industrial base will be important.”

Recognising this industrial base, PE firms, private debt funds and major defence primes are increasingly targeting autonomous technology, cyber capabilities and sovereign UK defence assets.

“Private debt funds are actively seeking to enter the market,” continues Mr Croker. “With sovereign capability now non-negotiable, businesses with sovereign intellectual property, and proven relationships with government customers and UK-based manufacturing capabilities and supply chains, are attracting strong interest.”

Defence ‘in vogue’

Previously cautious, UK defence-sector M&A began 2026 strongly, recording a record 84 trade transactions and 33 financial transactions during H1, underlining the sector’s growing attractiveness to investors.

“Going into 2026, UK defence capital was structurally underweight and the demand for assets was outpacing the number of businesses coming to market,” recalls Mr Croker. “PE was relatively new to the sector and was often outbidding trade acquirers. However, the appetite of banks for the sector has improved, creating liquidity which is a key driver.”

According to the Heligan Group’s 2026 report, ‘Defence & National Security M&A: Noise vs Fundamental Change and What Actually Matters’, unmanned aerial vehicle platforms, ranging from multirotor copters for local inspection to large fixed-wing and vertical take-off and landing systems used for long-endurance mapping, cargo delivery and surveillance, have attracted the greatest levels of funding.

Moreover, with autonomous systems accounting for a substantial proportion of battlefield losses in the Russia-Ukraine war, further M&A activity across the sector is expected. Many companies that have secured venture and growth capital funding are now emerging as highly innovative, high-growth businesses.

“This creates a halo effect and others, therefore, want to gain greater exposure to the sector,” asserts Mr Croker. “However, with funding still predominantly focused on large primes and limited flow down to small and medium-sized enterprises, there is a lot of rhetoric around more needing to be done to support the supply chain.”

Among the most notable defence-sector transactions in H1 2026 were Growth Capital Partners’ investment in Security HQ, Swedish investor Evity Invest’s acquisition of Scotland-based Martin Precision and Sullivan Street Partners’ carve-out of Senior plc’s Aerostructures division, subsequently relaunched as Zenix Aerospace.

Such transactions provide compelling evidence that acquirers are willing to pay strategic premiums where acquisitions can strengthen supply chain resilience, particularly as dual-use technology is increasingly viewed as a core procurement consideration.

“The defence and national security market is repricing with valuations increasing, but this fundamental change is still early in its cycle,” adds Mr Croker. “Capital follows capital, and now that the DIP has been released, a further step-up in M&A and investment activity is a near certainty.”

Upward trend

Despite the commitments outlined in the DIP, critics and military leaders continue to warn of persistent funding shortfalls and challenges in achieving warfighting readiness, concerns that supporters of the plan reject.

“The upward trend of M&A across the UK defence and national security industry is expected to continue into 2027 and beyond as the market is repricing defence and national security businesses,” says Mr Croker. “The dual-track processes between PE and trade buyers are now standard, and valuations in contested processes are increasing as financial buyers are willing to compete with acquirers.”

In a move interpreted by some as evidence that increased defence spending could become a priority under the new Andy Burnham administration, John Healey, the former secretary of state for defence who left the post earlier this year citing the need for more credible defence spending commitments, was appointed chancellor of the exchequer in July 2026.

“The UK is a highly attractive country for international buyers of UK defence companies,” notes Mr Croker. “PE is now outbidding trade in many processes and institutional capital in defence and national security has never been greater. The volume of transactions we are seeing makes us confident of another upward trend in deal activity. All indicators point toward this continuing into 2027, with multiple companies actively seeking a transaction.”

As strategic priorities evolve, the sector appears poised for a new era in which innovation, agility and industrial strength define success.

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Fraser Tennant