Donald Trump’s re-election to the US presidency last week could provide an added boon to a European drone industry that is already enjoying historic levels of M&A activity.

During his campaign, the president-elect repeatedly underlined his desire for European member states of the North Atlantic Treaty Organization (NATO) to increase their spending on defense above the current target of 2% of GDP.

A spike in demand for drones, which have become critical tools for modern military defense systems, could lead to an uptick in M&A activity in space.

Dealmaking in the European drone industry already has momentum. So far this year, total deal value in the sector stands at EUR 165.1m, more than 44% up on the year-to-date (YTD) value in 2023, according to Mergermarket data. Indeed, it is the highest YTD number since at least 2014, the data shows.

Of the 18 total deals in Europe so far this year, the largest transaction saw Spanish infrastructure and construction firm ACS [BME:ACS] lead UK-based electric drones specialist Skyports’ USD 110m Series C funding round in April.

‘Spend more’

Less than 48 hours after Trump’s victory, NATO Secretary General Mark Rutte said that member states “will have to spend more” on defense.

This is good news for Europe’s drone companies, whose technology can be used for ballistic missile detection and interception, reconnaissance and border control operations.

Investors are taking note. Shares in Italian defense group and drone manufacturer Leonardo [BIT:LDO], for example, are up more than 60% so far this year, and almost 8% since the election result became clear.

The company, which has a market capitalisation of EUR 14bn, sold a 3% stake to asset management firm BlackRock [NYSE:BLK] in September. It is reportedly assessing a dozen potential acquisitions and could close deals before year-end.

There have already been sizable deals in the defense segment this year. In September, German drone technology supplier Quantum Systems raised EUR 100m in a Series B round led by Notion Capital and Porsche.

Quantum Systems’ drones provide a range of capabilities to governments, including maritime surveillance, tactical mapping and artillery fire optimization.

Engineering deals

Defense is far from the only use for drones. According to market research firm Drone Industry Insights, the global drone market size is projected to reach USD 54.6bn by 2030, spurred on by the commercial market’s compound annual growth rate of 7.7%.

The commercial uses for drones range from agriculture and telecommunications to sustainable mobility and cargo delivery.

UK-based Survey Solutions, for example, has recently added drone surveying and hydrographic capabilities to complement its land engineering solutions. In January, local sponsor Westbridge backed a management buyout (MBO) of the firm, taking a majority stake for GBP 14.2m (EUR 17.1m).

Survey Solutions has already completed its first bolt-on since the MBO, taking a majority stake in JWG Survey & Engineering in September for an undisclosed sum.

Transactions in the pipeline include drone-as-a-service player Flight Services. Its owner, Nordic Unmanned, is exploring options, including a sale. Meanwhile, UK-based drone inspection and software specialist Cyberhawk is on the block.

If NATO members grant the new US president’s wish for increased defense spending, further dealmaking in the drone industry cannot be far away.