Australian defence deals are set to soar in the next 12-24 months as surging global defence budgets give rise to motivated buyers and higher valuations in what is emerging as a sellers’ market.

The US has a USD 1.5tn military budget for 2027, the UK plans to increase defence spending to 2.5% of GDP by April 2027, ReArm Europe is unlocking some EUR 800bn in defence investments, and the Australian government has committed AUD 425bn (USD 305bn) to the sector over the next decade.

According to Mergermarket data, Australian defence M&A recorded nine deals, worth USD 361m, so far this year, the highest deal count and second-highest volume on Mergermarket record, also surpassing the full year number since 2023.

There were three funding rounds, also the highest on Mergermarket record, valued at USD 274m, with the largest being Gilmour Space Technologies’ January AUD 217m Series E, led by the Australian government’s National Reconstruction Fund Corp (NRFC) and superfund Host-Plus.

Autonomous systems producer Advanced Navigation raised AUD 158m in a March Series C, with investors including Airtree Ventures, Quadrant Private Equity (PE) and NRFC. Sensing system builder Arkeus secured AUD 25m in a Series A in May, with investors including QIC Ventures, R+ VC, Folklore Ventures, and Dyne Ventures.

On the buyout front, PE firm Next Capital sold engineering contractor Eptec’s defence division to Washington, DC-based PE firm Arlington Capital Partners for about AUD 150m, accounting for the one buyout so far this year, compared to none in 2025.

Source: Mergermarket, data correct as at 02-Jun-2026. *ROY refers to Rest of the Year

Cross-border cranks up

It’s no surprise that Eptec attracted an international bidder, and many more cross-border deals can be expected, not least from PE buyers, partners at global M&A advisory firm Oaklins said at Australian member firm Henslow’s 2026 Defence Conference in Sydney last month (27 May).

PE firms, including in Europe and the UK, where defence was previously avoided due to strict ESG mandates, will provide M&A impetus, as will defence primes and neo primes as they acquire technology to stay relevant amid rapidly changing global battlefields.

The AUKUS trilateral security partnership between Australia, the US and UK will unlock deal potential between the three signatories and makes Australia an attractive destination for offshore buyers, said Oaklins UK-based partner Anthony Platt.

We can expect to see more US investment over the next year or two, according to US-based partner Ken Fukumoto, pointing to Australian defence tech Sentient, which was acquired by San Diego, California-based Shield AI in 2024 for an undisclosed sum, as a prime example of what US buyers want.

French companies were also motivated buyers for Shield AI but “the US won”, noted France-based partner Raphael Petit.

Source: Mergermarket, data correct as at 02-Jun-2026

What to watch

Anything drone-related, defence electronics, radar optronics, space, cyber, battlefield awareness, autonomous systems, advanced manufacturing, and supply-chain resilience are hot targets, which bodes well for companies that recently spoke to Mergermarket.

Defense robotics company Breaker could raise USD 25m-USD 35m in 12-24 months. Drone tech Mirragin and defence software developer Ocean Software are seeking strategic investors. Aerospace manufacturer AMSL Aero is looking to tap offshore investors for its ‘Series B+’.

It’s also worth watching what’s next for companies that recently raised capital like hypersonic testing firm Hypersonix Launch with its AUD 46m last October, and listed IT company Harvest Technology with its AUD 6.5m last month to expand into defence and autonomous systems.

With Israeli defence drone supplier KTEK Aerosystems seeing its share price rise by more than 100% on its 18 May listing day, next to watch are Australian drone makers Boresight, due to list on 10 June, and Carbonix, which told Mergermarket an IPO is an attractive option.

Early Australian PE defence investors – like Five V with its 2021 investment in cybertech Penten, Pemba with its 2022 investment in defence tech Aurizn, and Alceon with its 2024 investment in engineering company Shadbolt – could see rewards given the sellers’ market and that valuations are increasing, currently to higher double-digit multiples, according to the Oaklins partners.