The New Private Equity Cycle in the Defence Manufacturing Industry

Private equity has entered a structural realignment phase within the global aerospace and defence manufacturing ecosystem, driven by renewed capital deployment, higher valuation multiples, and the accelerating fusion of advanced manufacturing with national security priorities. Data from Q2 and Q3 2025 confirm a decisive rebound in defence M&A valuations, with Total Enterprise Value to EBITDA ratios stabilising between 16× and 17×—levels unseen since the pre-pandemic boom. Despite total transaction volumes remaining slightly below long-term averages, investor appetite has sharply focused on companies with proprietary intellectual property, embedded supply-chain roles, and direct exposure to long-cycle government programmes. The convergence of a $1 trillion U.S. defence budget, NATO’s collective rearmament drive in Europe, and the re-emergence of private credit as a core liquidity source has created a durable foundation for what analysts now call the new industrial super-cycle of defence manufacturing, one in which private capital functions as both financier and consolidator of sovereign capability. A defining feature of this cycle is the institutionalisation of sponsor-to-sponsor transactions, exemplified by KKR’s $2.2 billion sale of Novaria Group to Arcline Investment Management. This landmark deal illustrates the reopening of liquidity channels in private markets after a prolonged period of stagnation.