Capstone Partners Reports: Aerospace and Defense M&A Activity and Earnings Outperform Broader Market

BOSTON, July 16, 2025 /PRNewswire/ -- Capstone Partners, a leading middle market investment banking firm, released its Aerospace, Defense, Government, & Security (ADGS) Annual Report & M&A Outlook, finding that the U.S. Aerospace and Defense Industry deal activity increased in 2024, outperforming broader M&A market levels. Secor public company earnings growth also surpassed benchmarks.

U.S. Aerospace and Defense sector earnings outperformed the wider Public market in 2024, with sector index EBITDA rising 14% year-over-year (YOY) compared to 11% across the S&P 500. Sector shipments rose 8% YOY and were 8% above (pre-Max issue) peaks, supported by the post-pandemic recovery in global commercial air passenger traffic. However, the sector's outlook appears muted by emerging economic concerns, a reduction in new commercial aircraft orders, and ongoing production challenges.

Aerospace and Defense M&A volume reflected similar levels of growth, with the number of M&A transactions rising 15% YOY and broadly recovering to pre-pandemic levels. This compares with a 3% increase in North American M&A activity across all industries. Valuation multiples showed stability through 2024 with slight uplifts in both Aerospace and Defense M&A transaction multiples and public company trading multiples. Scale continued to demand significantly higher valuations through 2024, although industry deal multiples appear to have peaked within the $500 million to $1 billion enterprise value range. Sponsors increased their presence in the Aerospace and Defense market, accounting for the majority of deals. Dry powder reserves—ripe for deployment—will likely further expand this majority through 2025 with the bulk of funds held within the U.S.

Looking forward, Capstone expects the Aerospace and Defense market to display resilience amid macroeconomics headwinds (e.g., federal budget cuts, tariff volatility, elevated interest rates). Strong company fundamentals will likely continue attracting attention from both strategic and financial acquirers. Advantageous end market dynamics—including demand for air travel and new commercial aircraft, an ageing global aircraft fleet, rising cybersecurity crime, and ongoing geopolitical conflicts—offer robust and continued demand for Aerospace and Defense products and services.

Also included in this report:

• Commercial Aerospace reached new highs in 2024, but concerns are emerging for 2025.
• President's budget calls for a 13% increase in Defense spending.
• Federal cuts include Information Technology development, but opportunities exist in local government.
• Security Solutions & Cybersecurity see strong fundamentals and stable transactions.
• Training & Simulation benefit from technology advances.
• ADGS industry M&A activity shows resilience.

To access the full report, click here.

ABOUT CAPSTONE PARTNERS

For over 20 years, the firm has been a trusted advisor to leading middle market companies, offering a fully integrated range of investment banking and financial advisory services uniquely tailored to help owners, investors, and creditors through each stage of the company's lifecycle.  Capstone's services include M&A advisory, debt and equity placement, corporate restructuring, special situations, valuation and fairness opinions and financial advisory services.  Headquartered in Boston, the firm has 175+ professionals in multiple offices across the U.S. With 12 dedicated industry groups, Capstone delivers sector-specific expertise through large, cross-functional teams.  Capstone is a subsidiary of Huntington Bancshares Incorporated (NASDAQ:HBAN).  For more information, visit www.capstonepartners.com.

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SOURCE Capstone Partners