Benchmark #1 Privately Held Mergers and Acquistions Advisors Worldwide

Aerospace And Defense Sector M&A Update

Posted on August 23, 2022 By

The financial health of the aerospace and defense (A&D) industry has rebounded significantly from the negative economic COVID-19 impacts of 2020, poising the sector for a strong M&A market in 2022. The earnings of commercial aerospace firms have recovered, and original equipment manufacturers (OEMs) have announced a series of production rate increases for the years 2023 to 2025, raising the likelihood of supply chain acquisition activity in 2022. Additionally, the defense budgets of both the United States and Europe have remained stable, leading to high demand for defense products and services despite some production offsets due to supply chain challenges. 

In light of this positive momentum, A&D sector deal activity heated up in 2021 as the economy bounced back from the pandemic, plenty of capital was available, and the industry became optimistic about growth potential. In Q4 2021, A&D deal multiples averaged 13.5x TEV/EBITDA, up from a trailing 13-quarter average of 12.1x. The number of A&D transactions rose to 368 transactions in 2021, with an average value of $549 million, versus the 2020 average of $220 million. Commercial aviation M&A activity remained an exception as sellers were waiting on higher valuations to come back to the market. But overall, A&D deal activity was strong last year and is likely to maintain its momentum throughout 2022 as companies continue to pursue investment opportunities as the sector continues to recover. Buyers are seeking attractive uses of their capital, particularly pursuing advanced technologies, new capabilities, growth, higher market share, and access to new geographical markets. The need for new technologies includes hypersonic, simulation software, cyber, unmanned, and next-generation communications. These innovations can be especially lucrative for contractors that can produce them at lower costs and with lower in-house development risks. 

Defense Spending

This year, global defense spending is expected to grow by 2.5%, as nations cite the Russian invasion of Ukraine as a reason for increased spending. In the U.S., defense spending is budgeted to increase to $768 billion. This includes $118 billion for research, development, test and evaluation (RDT&E), which is up 10% from the $107 billion allocated in 2021. With a nearly 40% year-over-year uptick in 2021 defense M&A volume, momentum is expected to continue beyond this year. 

SPAC Activity

Special purpose acquisition companies (SPACs) played a major role in the record volumes and values in the sector in 2021. There were around $20 billion in SPAC transactions last year, mostly focused on space assets. These transactions were popular for electric vertical take-off and landing (eVTOL) aircraft, air mobility, and space companies. eVTOL and air mobility SPAC deals raised net proceeds of $3.8 billion, and space sector SPAC deals raised net proceeds of $3.4 billion. However, these SPAC deals have dropped off a bit in 2022 as values have decreased and regulatory and SEC scrutiny has increased. 

Ready to explore your exit and growth options?

The Space Sector

Last year, the commercial space sector saw significant strategic and financial investor interest with regard to launch systems, electronics, satellites, and analytics. The space launch services market is forecast to reach $32 billion by 2027, at a CAGR of 15.7% from 2020. The global satellite manufacturing and launch market is forecast to reach $390 billion by 2027, at a compound annual growth rate (CAGR) of 3.7% from 2021. 

In 2021, the United States’ Space Force saw its first dedicated budget and had a 2022 budget request of $17.4 billion. This includes the procurement of new equipment, research development & technology (RDT), and launch services. This means new contract opportunities for companies operating in this sector, such as existing A&D suppliers that are able to leverage their manufacturing and quality management expertise. Meanwhile, the big A&D strategic firms are looking to acquire proprietary technology in the space sector, and financial investors are investing heavily in emerging companies. There was $46.4 billion invested in a total of 429 companies last year. And, regarding SPACs in the space sector, there has been much transaction activity as companies seek aggressive add-on strategies to boost growth in order to reach projections that led to their high transaction valuations.

Uncertainties in the A&D Market

Defense, in particular, faces its fair share of uncertainties, both on geopolitical and regulatory levels. Geopolitical tensions are extremely elevated in 2022, largely due to Russia’s invasion of Ukraine, which has driven European nations to reassess and increase defense spending. As the defense sector becomes more fragmented in Europe, there could be increased consolidation and partnerships. Also, countries in the Asia-Pacific region are increasing defense as some tensions continue while China continues to pressure Taiwan, along with effects of the COVID-19 pandemic. With further escalation amid world powers, military spending is likely to increase along with demand for advanced technologies, bolstering M&A activity around the world.  

The Bottom Line

As far as any drawbacks, there are antitrust concerns that could dampen future M&A deals in areas of limited competition and the ongoing risk of COVID spikes that could impact commercial outlooks. However, even though 2022 started with financial markets eyeing correction because of increasing interest rates, inflation, and other risk factors, this year should continue to see healthy M&A activity in the A&D industry. Companies have strong balance sheets and the sector is in a good position for growth as both air travel and military spending increase. Certain defense technologies should drive deal activity, with significant boosts to defense budgets globally. Company valuations in this environment require solid operational due diligence to find growth opportunities. Buyers and sellers who do not properly understand the operational environment before closing a transaction can feel the negative effects of missed opportunities in the market. Having qualified M&A representation can always ensure that you are properly educated and prepared as a seller so that you can get the right valuation and the maximum sale price in a deal.


Schedule A Call


Americas: Sam Smoot at +1 (813) 898 2350 /

Europe: Michael Lawrie at +44 (0) 161 359 4400 /

Africa: Anthony McCardle at +27 21 300 2055 /  


Benchmark International is a global M&A firm that provides business owners with creative, value-maximizing solutions for growing and exiting their businesses. Benchmark International has handled over $8.25 billion in transaction value across various industries from offices across the world. With decades of M&A experience, Benchmark International’s transaction teams have assisted business owners with achieving their objectives and ensuring the continued growth of their businesses. The firm has also been named the Investment Banking Firm of the Year by The M&A Advisor and the #1 Sell-side, Privately Owned M&A Advisor in the World by Pitchbook’s Global League Tables





in 'Benchmark International'
in 'Benchmark International'
in 'Benchmark International'
in 'Benchmark International'

Recent Posts

Subscribe to Email Updates

Follow Us on Twitter


see all