The aerospace, defense, and space sector is accelerating deal activity, sustaining valuations, and reshaping competitive positioning.
The latest insights in CLA Meridian Capital’s Aerospace, Defense & Space Q1 2026 M&A Market Update point to a clear message for manufacturing executives: The aerospace, defense, and space (AD&S) sector is experiencing a powerful convergence of forces accelerating deal activity, sustaining valuations, and reshaping competitive positioning.
For C-suite leaders, the implication isn’t simply M&A is active — it’s that strategic action is becoming increasingly time-sensitive.
Broad-based M&A momentum is building
AD&S M&A activity in Q1 2026 reached 210 announced transactions, representing a 36% year-over-year increase and continuing a streak of rising deal volume over the past three quarters, according to the market update.
This sustained momentum isn’t isolated to one segment. Instead, it reflects a broad-based surge across commercial aerospace, defense, and space — creating a perfect storm of demand drivers.
Three macro forces are converging:
- A rebound in commercial aerospace demand
- Continued global defense spending, driven by geopolitical tensions
- Rapid expansion of the satellite and space economy
For manufacturers, this means the current environment isn’t cyclical in the traditional sense; it’s structurally supported by long-term demand fundamentals.
Strategic imperative: Act while business valuations are favorable
Despite a modest pullback from peak levels in 2021, transaction multiples remain healthy and well-supported by strong investor interest from both private equity and strategic buyers.
Particularly attractive segments include:
- Highly engineered and proprietary components
- Aftermarket services
- Defense and space electronics
These areas are commanding premium valuations due to their defensibility, technical differentiation, and predictable cash flows.
For privately held manufacturers, this presents a window of opportunity, whether the objective is partial liquidity, strategic partnership, or full exit. For acquisitive strategics, it reinforces the need to stay competitive in deal processes that are increasingly crowded and price-disciplined.
Download the complete report: CLA Meridian Capital’s Aerospace, Defense & Space Q1 2026 M&A Market Update
MRO: A case study in durable demand
The maintenance, repair, and overhaul (MRO) segment offers a clear illustration of why investors remain bullish.
An aging global fleet — rising from an average of 12.5 years in 2023 to over 15 years in 2026 — is driving increased maintenance demand and higher frequency of aircraft-on-ground (AOG) events.
This dynamic creates:
- Recurring, high-margin service opportunities
- Strong pricing power for responsive providers
- Increased value placed on scale, logistics, and technical workforce
As a result, MRO has become a focal point for both strategic consolidators and private equity firms, with recent high-profile exits reinforcing market confidence.
For manufacturers with aftermarket exposure or service capabilities, this highlights a critical strategic question: How much of your value is tied to lifecycle engagement versus one-time production?
Capital markets are reinforcing aerospace sector strength
Public market performance is further validating sector strength. Aerospace equities have outperformed the broader market, supported by strong demand, record backlogs, and continued investor appetite. Meanwhile, defense equities have rebounded following renewed global spending commitments, including Europe’s significant rearmament initiatives.
This alignment between public and private markets creates confidence for dealmakers and reinforces valuation stability across the ecosystem.
What this means for manufacturing leaders
For CEOs and CFOs in manufacturing, the takeaway is clear:
- Portfolio strategy matters more than ever — Both divestitures and acquisitions are being used to refine focus and unlock value.
- Timing is critical — Strong valuations and active buyers create a favorable — but competitive — environment.
- Differentiation drives value — Capabilities in engineering complexity, aftermarket services, and defense alignment command premium pricing.
How CLA can help manufacturers with M&A considerations
Manufacturers that are proactive in evaluating their strategic positioning, rather than reactive to market shifts, will be well positioned to capitalize on this cycle. CLA advises manufacturers and many other companies on all aspects of M&A — reach out to our experienced team for personalized assistance.