Defense electronics to become a core focus for PE in 2026
PE deal activity in defense electronics is accelerating as modern conflicts push militaries to spend more on sensing, electronic warfare, resilient communications, and mission computing. PitchBook data shows 27 defense electronics deals in 2025—up 93% YoY—making it one of the most active years in our dataset (back to 2017). While total deal value rose modestly to $1.7 billion, the higher deal count underscores where the opportunity is forming: small-to-midsized enabling technologies beneath the prime contractor level.
Strategic buyers remain the clearest exit path as primes and Tier 1 suppliers look to lock in electronics capability and secure supply chains. Recent large transactions and exits highlight that appetite, including AeroVironment’s $3.5 billion acquisition of BlueHalo (May 2025), Amphenol’s roughly $1 billion purchase of Trexon (November 2025), and Honeywell’s $1.9 billion deal for CAES (September 2024).
This note goes deeper into the technologies driving this activity, mapping where they sit within defense systems, how they function, and what their total addressable markets and projected growth rates look like over the next decade. As global defense budgets tilt toward electronics-intensive upgrades, PitchBook expects sustained PE interest in scalable, qualification-heavy businesses with durable aftermarket exposure.
Table of contents
| Key takeaways | 1 |
| Defense electronics PE targets, exit pathways, and risks | 2 |
| Global market overview | 5 |
| A PE-driven taxonomy of defense electronics | 6 |
| Other defense electronics deal activity | 16 |
Defense electronics is seeing strong growth in deal count, while the average size of deals has shrunk.
