RAINCLOUD DEFENSE Global Defense M&A Trends 2025: The Race for Integrated Mass

By Norine MacDonald and George Howell

Published on January 7, 2026

The 2025 defense market shattered records with ~$218 billion in transaction volume (+102% YoY), defined by a dual mandate: rebuilding industrial capacity (“Steel”) and securing digital dominance (“Silicon”). Hardware & Industrial deals captured ~70% of total capital to address the “Empty Warehouse” crisis, ~30% for software. The year’s highest valuations belonged to Dual-Use software. National Security commercial technologies in cyber, space, and AI attracted nearly 50% of investment. Amidst this bifurcation, Private Equity executed a “silent consolidation,” deploying ~30% of total deal value to professionalize the distressed sub-tier supply chain. 

Ultimately, the market was not defined by a choice between legacy platforms and modern autonomy, but by the race to integrate them.

The 2025 M&A market was characterized by a resurgence of large-scale consolidation, distinguished by a strategic pivot: capital deployment favored the digital and dual-use architectures that govern modern systems rather than traditional platform manufacturers. The top five transactions alone accounted for over $73 billion in deal value, signaling a massive consolidation of the “invisible infrastructure” of modern warfare, from the semiconductor foundries powering 6G radars to the identity protocols securing the Pentagon’s cloud.

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