M&A OUTLOOK: IMPROVING CONDITIONS FOR FURTHER AEROSPACE DEALS

With government and private investment in aerospace and defence continuing to grow, Ruth Hargreaves, partner in the corporate team at purpose-led independent law firm Brabners, outlines the significant potential for further M&A activity in the sector this year.

The inherently innovative nature of the aerospace industry means that it has long been a hotbed for private investment. Indeed, venture capital investment in aerospace and other defence-related industries globally has increased more than 18-fold over the past decade, from $500 million in 2014 to an estimated $8.7 billion in .

With the North West playing host to approximately a quarter of the UK’s aerospace industry as well as a plethora of world-leading academic institutions, the region is naturally a major target not only for inward investment but also a significant force in driving M&A. BAE Systems, for example, has been one of the sector’s most acquisitive firms over the past decade, leading 13 transactions – including the bolt-ons of two British firms last year.

With economic conditions, notably interest rates, continuing to stabilise following the turbulence of recent years, it’s likely that mergers, acquisitions and strategic investments will play an ever-greater role in shaping the aerospace ecosystem in the coming months.

But what are the forces that will likely shape that increase?

Surveying the landscape

Before we begin to explore future activity, it’s worth noting the growing momentum we’ve seen in broader UK M&A activity over the last 12 months. According to PwC’s latest market review, deal values jumped by an impressive 37% in 2024. UK deal volumes also outperformed the wider EMEA region, by a considerable margin, with recent data showing that almost a fifth of the EMEA ‘companies for sale’ at the start of 2025 – 299 in total – are based here in the UK and Ireland.

Those findings are matched in our own performance. 2024 was one of Brabners’ most active years to date, with the corporate team that I’m part of advising on more than £800million worth of transactions – a 31% increase on the year prior.

In short, we’re seeing an increase in investors – be they VCs, private equity or trade buyers – more willing to deploy capital as economic conditions become more stable and favourable. In many cases, funds are sat on dry powder built up in recent years while they have spent time focusing on optimising their existing portfolios.

 Geopolitics and government spending

Looking ahead, aerospace is likely to continue to attract the attention of funds as a clear growth opportunity. The apparent increase in global tensions and geopolitics is inescapable, evidenced in the UK government pledging an extra £2.9billion in defence funding in the Autumn Budget. Globally, defence spending grew by more than 7% last year, with British manufacturers a key beneficiary.

Meanwhile, the Chancellor also used the Budget to commit a further £975million of funding to support tech-focused R&D in the aerospace sector. Tech-enabled firms have been one of the major driving forces behind M&A growth in recent years, as businesses and funds vie for supremacy over innovation, and its use within aerospace manufacturing makes the sector all the more attractive for VC and private equity backers looking to achieve capital gains.

The government’s long-awaited Industrial Strategy, which has now been pushed back to June, is also set to prioritise the overlapping advanced manufacturing and tech industries, serving to underline this point.

 Security and strength in depth

While we’ve talked about the improving economic picture and the falling cost of funding – albeit it remains higher than we’ve seen in generations – the challenges of recent years are also likely to determine M&A motives. At the top end of the market, overseas conflicts and shipping issues have supported a general trend towards nearshoring. Manufacturers need certainty over their supply chains and, as such, consolidating and bringing those specialist suppliers into the fold through acquisition or investment has become for many a necessity.

Likewise, for those SME businesses operating within the supply chain, the economic instability of recent years has increased their cost base and, in a number of cases, tested their financial resilience. As such, we’re seeing a greater openness towards consolidation amongst the lower to mid-market as they seek to pool resources and utilise economies of scale to contend with elevated operating costs.

Here to help

For any management teams considering how best to capitalise on these conditions – be it through sourcing further investment or executing their own acquisition strategies – the support of an experienced advisor can be a key determinant of success.

The M&A landscape is constantly shifting, and navigating it effectively while securing the best deal for your organisation and its shareholders can often be a difficult balance to strike.

Our corporate practice has extensive experience advising across the full business lifecycle, including on mergers and acquisitions, private equity investments, venture capital investments, reorganisations, business sales and exits, joint ventures and partnerships.

This includes our expert deal advisory team, which is comprised of specialist accountants with a sole focus on proactively creating deals and bringing parties together.

Our strong relationships across a broad range of funders throughout the UK, including banks, alternative debt providers, private equity funds and asset-based lenders means that we’re well placed to support businesses of any size in delivering their growth ambitions.

For more information on how Brabners’ corporate team can support your business, contact ruth.hargreaves@brabners.com