Private equity firms are accelerating investments in Europe’s defence sector, as historic levels of government rearmament spending reshape the M&A landscape across the continent, according to Bloomberg.

Tikehau Capital, CVC Capital Partners, and Weinberg Capital Partners are among a growing group of sponsors building dedicated defence investment strategies. Tikehau is currently raising an €800m aerospace and defence fund, backed by leading industrial players including Airbus, Safran, and Thales, while Weinberg Capital recently closed its Eiréné fund at €215m, surpassing its original target.

Private equity dealmaking in the sector has already reached $790m so far in 2025, nearly matching the $1bn annual threshold typically seen only in exceptional years over the past two decades, according to Bloomberg data.

“The defence sector looks set to buck the wider downturn in M&A,” said Frank Bretag, Head of Industrials Advisory at UniCredit. “European government budgets are only heading upwards.”

Investor sentiment towards defence assets has shifted dramatically, with ethical concerns around ESG compliance giving way to the strategic importance of security and technological resilience. “Investor demand for defence exposure is growing, as barriers linked to ESG concerns continue to fall,” said Lionel Mestre, Partner at Weinberg Capital.

The European Commission’s €800bn “ReArm Europe” initiative is also helping to mobilise private capital to meet growing defence needs, acknowledging that state budgets alone will be insufficient.

“There’s only so much governments can do,” added Ian Fujiyama, Head of Aerospace, Defence, and Government Services at Carlyle Group. “Private equity brings essential capital and expertise.”

At the same time, strong demand for defence assets is creating attractive exit opportunities. Advent International has sold Cobham Satcom and is considering options for Ultra Precision Control Systems, while Searchlight Capital is exploring a sale of Survitec’s aerospace and defence division.

However, heightened political scrutiny around the ownership of strategic assets could complicate future deals. Bain Capital’s reported interest in Chemring Group has already attracted political attention.

Source: Bloomberg