in modern warfare, is paramount to maintaining the upper hand in conflict. “National security is increasingly becoming an invest- ment theme,” says Meghan Welch, managing direc- tor at investment bank Brown Gibbons Lang & Company (BGL). Despite robust investment and active dealmaking in the space, PE investors still account for only a fraction of defense deals. In order to get in on the M&A action and capitalize on defense tech’s massive growth poten- tial, experts say, private equity must be mindful about which path it takes into the market.
Accelerating Innovation, Accelerating Competition
Ongoing wars in Ukraine, the Middle East, and else- where have dramatically expanded the U.S. gov- ernment’s military budget, with the Department of Defense pegging nearly $300 billion for contract and financial assistance awards, including grants and loans. That government support, along with tens of billions of dollars in private sector investment, has turned the defense tech market into a hotbed of innovative disruptors pushing the boundaries of tech capabili- ties with craft autonomy, AI-powered sensors, tactical computing, and more. “This surge of innovation has supported a proliferation of defense technology startups seeking to commer- cialize cutting-edge capabilities,” S&P Global Market Intelligence wrote in a March 2026 report. It’s proven attractive to venture capital investors in particular: VC funding for defense technology nearly tripled between 2020 and 2025, topping $29 billion last year, according to S&P Global. VC has also fueled valuations to new heights. At less than a decade old, U.K.-based Anduril, which special- izes in advanced autonomous defense systems, is said to be pursuing a $100 billion valuation with fresh fund- ing that would follow last May’s $5 billion Series H round, led by Thrive Capital and Andreessen Horowitz. Corporate acquirers, meanwhile, have also emerged as active buyers to “fast track” their own innovation and product development, says BGL’s Welch.
D efense investment continues at full steam in the U.S. as geopolitical conflicts push defense spend to the top of the White House’s priority list. Driven by growing demand and the opportunity for lucra- tive government contracts, a new class of defense start- ups has emerged on the bleeding edge of defense tech- nology innovation. Investors, including private equity sponsors, are jump- ing into the sector, encouraged by public funding and a seemingly insatiable federal appetite for defense tech that,
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