Surging government defense spending is driving PE investment in Europe’s aerospace and defense sector, leading to a record high for deal value in Q1.
According to PitchBook data, the first three months of the year saw PE deal value in European aerospace and defense double from €2.3 billion (around $2.7 billion) in Q4 2025 to €5.9 billion. However, deal count fell from Q4’s peak of 14 to seven in Q1 as deals grew larger.
The structural driver is government budget commitments to defense spending, according to PitchBook’s Q1 2026 Aerospace and Defense Report.
In March, Germany approved a constitutional amendment that exempts defense expenditure from its debt brake, potentially freeing up around €500 billion in spending power over the coming decade. This prompted an immediate increase in procurement activity across land, naval and electronics systems.
The UK has pledged to lift defense spending from 2.3% to 2.5% of GDP by 2027, while France’s long-term military spending program has driven annual procurement budgets roughly 40% higher since 2022.
Poland, which allocates about 4% of GDP to defense, the highest share in NATO, is also continuing a major buildout of air defense systems and armored vehicles, creating strong demand across the Tier 2 and Tier 3 supplier base where PE firms are most active.
Competition for assets in the sector has significantly increased, and sponsors are acting fast to build out platforms ready to capture the procurement wave. Here is a list of the most active investors by deal count of Europe A&D buyouts since 2020.
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