PE investment in Europe’s aerospace and defense sector is gathering momentum this year, with deal activity on pace to match or even exceed that seen after Russia’s invasion of Ukraine.
The sector has attracted around €620 million (around $703.7 million) across 12 deals, representing more than half of 2023’s €1.2 billion total.
Deal activity in the sector is projected to stay strong as increased government spending boosts manufacturing and further investment.
According to PitchBook’s Q1 2025 Aerospace and Defense report, the change is part of a broader shift in geopolitical dynamics. As Europe seeks to be more independent in military hardware, it will bring on “dramatic spending growth across many European defense companies.”
In March, the European Commission launched the ReArm Europe program, which aims to mobilize €800 billion for European defense over the next decade.
The European Union also agreed this month to launch a €150 billion loans-for-arms fund as the Russian-Ukrainian war continues. The changes come as US President Donald Trump puts more pressure on NATO allies to increase investment in national defense.
On the country level, Germany recently became the world’s fourth-largest defense spender, after the US, China and Russia, according to the Stockholm International Peace Research Institute.
Its defense minister, Boris Pistorius, said last week that the country could gradually move towards spending 5% of its GDP on defense after parliament approved exempting defense spending from the country’s strict debt rules in March.
Other countries, including Poland, Denmark and Sweden, are all looking to ramp up their defense expenses.
The effect has already been reflected in public company performance. German security technology provider Rheinmetall reported a preliminary 46% increase in Q1 sales, totalling €2.3 billion, while French cybersecurity company Thales has confirmed 5% to 6% of organic growth this year.
The trend is expected to continue and result in accelerated spending growth across European defense companies, which may yet catch up with their US counterparts in terms of scale.
Featured image by Anton Petrus/Getty Images
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