Defense companies are set for more deals as they invest their growing cash in new technologies like AI, advanced drones, and space systems. Technology has progressed faster because of conflicts around the world, most notably the war in Ukraine.
According to a recent report, Financial Times’ Vertical Research Partners predicts that in the next five years, the top 15 defense contractors will have $50 billion in free cash flow, double what they had together at the end of 2021.
There will be more deal-making, and more prominent companies will continue to spend the money on buying back shares and paying out higher dividends.
Michael Sion at Bain & Co. expects mergers and acquisitions in aerospace and military to rise. That also means he sees more money coming from private equity and venture capital firms.
He said, “Many companies are looking to expand what they offer to get ready for advanced technologies.”
Venture capital deals in the defense sector have increased by 18 times over the past 10 years
Larger firms will target fast-growing military areas such as space and defense electronics.
A new Bain report also states that the value of venture capital deals in the military sector has increased by 18 times over the past 10 years.
Much of this is attributable to the blending of commercial and defense technologies. Investors, especially in Europe, have been hesitant about investing in this sector because of ethical concerns. However, their outlook has changed since Russia invaded Ukraine nearly three years ago.
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