Aerospace & Defence M&A 2026 — MP Corporate Finance

22 September 2026

Primes Move Upstream: What a Record Deal Volume Means for Aerospace & Defence Suppliers

Aerospace & Defence M&A 2026 has reached a new half-year high, with 192 transactions announced globally in H1 — a 40% increase year on year. Yet the record deal count points to more than a buoyant market: primes and airframers are reshaping their supply chains, seeking fewer, more capable and resilient partners. The move is expected to accelerate consolidation across the sector.

At MP Corporate Finance, we track M&A activity throughout the Aerospace & Defence value chain, with dedicated coverage of commercial aviation, defence, and MRO market segments. The first six months of 2026 reinforced a clear shift in the market: consolidation is increasingly being driven not simply by attractive opportunities, but by the structural demands facing the industry.

Commercial aviation supply chains under pressure

With airlines globally adding more than 1,200 new planes to the order books of Airbus, Boeing, Embraer, and ATR in H1 2026 — up more than 13% versus H1 2025 — demand continues to outrun supply. Despite a 15% increase in combined output from Airbus, Boeing and Embraer, the industry backlog still exceeds 16,500 aircraft, equivalent to more than ten years of production at current rates.

A key bottleneck is engines and their components. This helps explain GE buying into the blade manufacturing business and Airbus and their partner Safran buying out Tikehau’s stake in Aubert & Duval. Both transactions show that M&A is an effective tool not only to hedge supply chain risks but also to leverage market potential through insourcing critical technologies and manufacturing processes.

For suppliers with the right profile, the market remains highly receptive. Certification, established programme positions, and genuine process or product IP are increasingly valuable, with IP-rich businesses commanding valuations of up to 20x EBITDA.

As airframers and primes streamline their supplier bases, single-discipline SMEs face a strategic crossroads: grow through acquisition or find a platform that allows them to leverage their capabilities at scale. With several hundred companies contributing to a single airframe, the scope for further consolidation is far from exhausted.

Europe’s defence build-up exposes a widening supply chain gap

EU member states are set to spend more than €450 billion on defence this year, with expenditure expected to reach €500 billion by 2027. Germany’s €35 billion space funding package shows how far the investment agenda has broadened, extending into sovereign launch capability, satellite communications and space-based ISR.

Europe already has much of the technological foundation in place: Safran, Rolls-Royce, and MTU in propulsion; MBDA in guided munitions; Hensoldt, Thales, and Leonardo in radar and avionics. The constraint lies further down the supply chain, where capacity, balance-sheet strength, and access to capital remain insufficient for the scale of expansion now required.

Primes such as Airbus, Rheinmetall, Leonardo, and BAE Systems are restructuring their supply chains around a smaller number of financially capable, scalable partners. Suppliers unable to co-invest in development or ramp capacity will be phased out.

A consolidation wave is forming around critical future technologies, such as drone defence and cyber, where the imperative is to compress time-to-market and achieve industrial scale. Valuation multiples reached well beyond 20x (median value) EV/EBITDA in H1 2026 — for owners of well-positioned businesses, this is a seller’s market in the most literal sense.

MRO: a super-cycle still in its early stages

The demand picture in the aftermarket (Maintenance, Repair, Overhaul) is straightforward: new airframes are hard to come by, so airlines and lessors are extending the service life of existing fleets well beyond originally planned retirement. The global average fleet age recently reached 13 years, up more than a year from 2024. Older aircraft require more frequent inspections and consume more spare parts, with every additional year of service life compounding maintenance demand.

Engines sit at the centre of this pressure, accounting for roughly 70% of total MRO spend. A new wave of shop visits is now approaching as LEAP and GTF engines delivered in recent years accumulate flight hours and move into their first scheduled overhauls. LEAP shop visits alone are projected to increase from around 800 annually today to more than 5,000 by 2040, placing substantial pressure on certified engine capacity.

Primes are responding directly. Pratt & Whitney committed over $100 million to expand GTF throughput at US facilities, while Safran opened a dedicated LEAP shop in Querétaro. Consolidation is gathering pace in parallel, with ITP Aero and StandardAero completing landmark transactions this year in preparation for the upcoming maintenance super-cycle.

The MRO providers best positioned to capture value ahead of the super-cycle peak will be those that combine scale, certified geographic reach, and the digital infrastructure to deliver it efficiently.

Aerospace & Defence M&A 2026: a seller’s market for those who are ready

The structural forces driving Aerospace & Defence M&A 2026 in the first half year show no sign of abating. Commercial production ramp-up will remain constrained well into the decade, NATO budget commitments provide multi-year demand visibility in defence that is converting into contracted programmes, particularly along Europe’s eastern flank. And MRO is working hard to bridge the gap until new airframes and engines take to the skies.

The M&A market will remain active as these structural pressures continue to reshape the sector — streamlining of supply chains, building scalable platforms, securing critical technologies, and building capacity to increase maintenance throughput all point to continued dynamic deal activity.

In Aerospace & Defence M&A, achieving critical mass through consolidation is now a prerequisite for remaining relevant. The question for many owners is not whether to act, but when.

If you would like to discuss what the current M&A environment means for your business, we would be happy to share our perspective. Get in touch with our expert!

Frequently Asked Questions

How did the Aerospace & Defence M&A market perform in H1 2026?

H1 2026 set a half-year record with 192 transactions announced globally, up 40% year on year. Commercial aviation accounted for 121 deals (up 48%), defence for 127 (up 65%), and MRO for 31 (up 55%). Deal counts across segments are not mutually exclusive.

What is driving consolidation across the A&D supply chain?

Airframers and primes are reducing their supplier bases to fewer, larger, and more capable partners. Rising qualification thresholds, growing engineering complexity across next-generation engines and composite aerostructures, and tightening programme timelines make single-discipline suppliers increasingly difficult to justify. The result is a structural push toward consolidation visible across every segment of the value chain.

How are European defence budgets affecting M&A activity?

EU member states will collectively spend more than €450 billion on defence in 2026, rising to €500 billion by 2027. That capital is flowing into contracted programmes, but the supply chain — particularly at Tier-2 and Tier-3 levels — is structurally unprepared for the scaling required. The gap between budget ambition and industrial capacity is the primary engine of defence M&A right now.

What valuation multiples are A&D suppliers achieving?

As of mid-2026, median EV/EBITDA multiples for A&D suppliers stand at 22.9x overall; 22.8x in commercial aviation and 23.2x in defence, all meaningfully above year-earlier levels. IP-heavy suppliers with certified, embedded positions are commanding premiums of up to 20x EBITDA.

Why is MRO becoming an increasingly important M&A theme?

The MRO market is entering a structurally stronger demand cycle. With new aircraft still difficult to source, airlines and lessors are extending fleet lives, pushing the average global aircraft age to 13 years and increasing maintenance intensity. Engines are the main pressure point, accounting for roughly 70% of total MRO spend, while LEAP shop visits alone are expected to rise from around 800 annually today to more than 5,000 by 2040. This is supporting consolidation around certified capacity, broader service capabilities, and more efficient geographic coverage.