in its March report, reflect an expanding landscape of innovative startups, yet fewer mature targets for stra- tegic and PE buyers. Stephen R. Perry, managing director at A&D-focused investment bank Janes Capital Partners, which advised ExoAnalytic on its sale to Anduril, agrees that the indus- try’s proliferation hasn’t opened the doors to more PE investment as dramatically as it has for other classes of private investors. “Technology changes in days and weeks, not months or years, introducing technology risk that traditional PE firms are either ill-equipped or unwilling to assume,” he says. Investing in the Cutting Edge PE investment in the most cutting-edge defense compa- nies is rare, but not unheard of, and reflects sponsors’ appetite for more seasoned targets. Arotech, a defense-focused training and simulation tech- nology provider, had already been operating for 35 years when it was acquired by Albion River from its previous sponsor Greenbriar Equity Group in February 2025. More recently, in August, McNally Capital acquired a majority stake in 18-year-old TENICA Global Solutions, which pro- vides digital modernization solutions to defense, space, and intelligence missions. According to Perry, PE can miss out on investing in many of the younger defense tech innovators whose capital needs are met early on by VC. “By the time a defense tech business fully matures, in many cases, it no longer needs or wants PE investment,” he says. “If PE wants to play in defense tech, investing earlier is a necessity.” Add-ons are one area in which PE sponsors have tar- geted younger, innovative companies. In March 2025, for example, Artemis Capital Partners-backed SightLine Applications acquired Athena AI, an AI-enabled computer vision system for defense applications that, at the time of the transaction, was only four years old.
Technology changes in days and weeks, not months or years, introducing technology risk that traditional PE firms are either ill- equipped or unwilling to assume.
STEPHEN R. PERRY | Managing Director, Janes Capital Partners
“Rather than building every capability organically, strate- gics increasingly recognize that speed has become a com- petitive advantage,” she says. “Acquiring a best-in-class technology company often compresses years of internal development while simultaneously securing engineering talent, intellectual property, and customer relationships.” Last March, for example, Anduril announced its acqui- sition of ExoAnalytic Solutions to integrate the compa- ny’s satellite tracking technologies—including a network of more than 400 telescopes and advanced modeling and simulation capabilities. Elsewhere, publicly listed Leonardo DRS announced in July its $450 million acquisi- tion of Raft, an AI software provider supporting real-time situational awareness for national security customers. On the private equity front, investment activity is more muted. According to PitchBook’s Q1 2026 data, only 18 of an esti- mated 143 private equity A&D transactions were defense deals. Defense transactions totaled $1.2 billion in the quarter, accounting for about 10% of the $11.3 billion in total PE A&D transaction value for the quarter. Further, S&P Global found that while VC funding rounds for defense companies have steadily climbed, M&A activ- ity is trending downward. The numbers, S&P Global noted
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