Outlook 2025: Aerospace, Defense & Government Services

As we head into 2025, we're seeing many reasons for continued strengthening in the M&A and private capital markets. Over the past year, there has been steady improvement in the rate environment, the macroeconomy, consumer spending and financial health, and corporate earnings. 

Against this backdrop, we believe 2025 will see ongoing growth across several areas of aerospace, defense, and government services, and we're excited for the opportunities to come. See our perspectives on the overall M&A and private capital markets.

Aerospace, Defense & Government Services: Dynamic and Mission Critical

The aerospace, defense, and government services industry features continuous innovation, market resilience, and mission-critical products and services—all traits that are highly appealing to investors.

In this dynamic market, there are substantial opportunities for value creation in several core sectors, including aerospace technology and products, aviation services, defense and space, and government technology and services. Across these areas, a diverse range of companies are attracting buyer interest.

Below, we share the trends behind this activity, key categories particularly well positioned for success, and recent clients that exemplify the industry's investment potential.

Aerospace Technology & Products: A Positive Demand Outlook

Long-term demand signals are positive across aerospace technology and products, with Boeing and Airbus both having record production backlogs. However, supply chain challenges are persistent, and line-of-sight to stated targeted build rates remains uncertain.

Recent M&A activity has centered around small tuck-ins and larger supply chain consolidation, as well as take-privates of public companies. As the industry overcomes supply chain obstacles, we expect investors to increasingly seek ways to participate in the segment. ERA Industries (now doing business as BTX Precision), a precision manufacturer of mission-critical components for the aerospace, defense, and other high-reliability markets, is an example of a differentiated platform that investors will prioritize.

Test and measurement businesses are also well positioned for growth, playing a vital role across aerospace and defense platforms. They are instrumental in helping companies meet key standards and regulations while enabling innovation and improving other aspects of product design and performance. Embodying this category's investment potential is our client Raptor Scientific, a global leader in complex test and measurement solutions for advanced defense, space, and aerospace applications.

Aviation Services: Strong Investor Conviction

Years of underproduction, an aging global aircraft fleet, and steady growth in global travel are driving strong demand across all segments of aviation services. Against this backdrop, investors have aggressively pursued well-positioned aftermarket assets over the past 12 to 24 months, particularly at scale.

"The recent IPOs of Loar Group and Standard Aero highlight strong investor conviction in the aviation aftermarket," says Chris Smith, a managing director and the ADG team lead. "We're excited to see the aftermarket continue to thrive and generate investor interest across both private and commercial aviation." Our client FDH Aero provides another example of a scaled, differentiated platform, specializing in mission-critical components—including hardware, electrical, chemical, and consumable products and services—for global OEM and aftermarket customers.

Meanwhile, within the private aviation segment, growth in both the business jet fleet and flight operations continues to drive investor interest in FBOs, business aviation MROs, and other business aviation services. Harris Williams advised Modern Aviation on the sale of a majority stake to Apollo-managed infrastructure funds, which typifies the investment opportunity in the FBO sector as demand for private aviation and related FBO services grows. The essential components of its success include strategic location selection, a commitment to service, an exceptional management team, and a robust acquisition playbook.

Defense & Space: Down-to-Earth Opportunities

A broad set of defense and space companies are helping navigate an evolving and increasingly complex threat environment, capturing investor attention as they do so. "The defense and space segment is on investors' radar due to several powerful themes, including modernization, multi-domain connectivity, and an increasingly limited supply base," says Smith. "Additionally, competition among global powers is driving significant investment in cutting-edge technologies used in warfare."

Throughout the sector, strategic buyers are focused on augmenting capability gaps to support the future fight. For instance, Harris Williams advised Excelitas Technologies on its sale of select aerospace and defense electronics businesses to Teledyne Technologies. Likewise, we worked with Communications & Power Industries (CPI)'s Electron Device Business (EDB) on its sale to TransDigm Group. EDB is a leading global designer and manufacturer of proprietary high-power microwave components that enable many of the most advanced radar, electronic warfare, missile defense, directed energy, and quantum sensing platforms operated by the Armed Forces of the United States and its allies.

We're also seeing a diverse range of opportunities for sponsors in the segment. For example, we advised Aeronix Technologies Group (ATG) on its sale to Tinicum L.P. and its affiliated funds. ATG supplies high-reliability defense electronics that support secure, high-speed transmission, storage, and processing of data for aircraft, shipboard, ground, and space applications.

At the same time, a growing group of businesses are taking advantage of opportunities within the expanding space subsector. For instance, we advised Arlington Capital Partners on its acquisition of Stellant Systems, a best-in-class provider of RF amplification products for space, electronic warfare, radar, and other defense technology end-market applications.

Government Technology & Services: Urgency for Modern Solutions

Several dynamics are contributing to an evolving government technology landscape and plentiful investment opportunities, including a growing emphasis on digitization, more concerted citizen engagement, increasing use cases for emerging technologies, and accelerating cloud adoption. All these factors are leading politicians, IT leaders, and users to demand modern digital solutions that improve government operations and digital service delivery from government agencies.

Multiple categories of govtech solutions are especially well positioned for growth, such as administration and operations, asset and resource management, civic engagement and public services, and public safety and justice. A wide range of recent Harris Williams engagements exemplify these opportunities, including WatchWire, Trax, Comply365, and Made4net.

Looking Forward

With an appealing mix of innovation, market resilience, mission-critical products and services, predictable revenue, and defensible positions, a range of aerospace, defense, and government services companies will be on investors' radar in 2025.

Heading into the new year, we believe the industry's long-term fundamentals and encouraging trends will continue to generate concrete opportunities for M&A investors. "Each core sector of aerospace, defense, and government services offers exciting potential for a variety of investor types," says Smith. "Key traits being prioritized by investors can be found across the industry, such as resilient and predictable demand, a track record of growth with additional runway, large addressable markets, and sustainable tailwinds."

Looking ahead, we look forward to partnering with aerospace, defense, and government services investors and company leaders worldwide to help them navigate the M&A and private capital markets and unlock value in their businesses.

Learn more about the Harris Williams Aerospace, Defense & Government Services Group.