Three ways private equity can support UK defence

Defence deal volumes are at a decade high, but private equity is still a part player. Eliott Rawling outlines three ways in which private capital can support the sector and the opportunity for funds that act now. 

Earlier this year, we hosted an event with the Ministry of Defence (MoD). The premise was simple but perhaps unusual: 10 dual-use technology companies, each given five minutes to pitch their capabilities to a room of venture capital and private market investors. Government officials were present.

The MoD's message was clear. The UK defence sector needs private capital to fund new technology and help promising small businesses scale. Government-funded programmes, such as development grants, go some way to address this, but public funding alone cannot close the innovation gap. That morning was an attempt to bridge it.

Where does private equity fit in? 

Our January 2026 Aerospace and Defence insight report showed how M&A deal volumes in aerospace and defence have hit their highest level in a decade, but the spike is overwhelmingly driven by trade buyers. The large prime contractors are moving to secure their supply chains, and that is generating significant activity.

However, private equity-backed deal volumes are also ticking upwards, from 109 in 2024 to 135 in 2025. That increase is modest relative to the scale of the opportunity.  

Separate Europe-wide data shows that despite government commitments to increased defence spending across Europe, the value of PE growth and buyout investments into defence assets roughly halved year-on-year, from €5.7 billion in 2024 to €2.2 billion in 2025 (defence sector only). 

The gap between available capital and investable assets is a recurring theme: many defence companies are still too early-stage to attract mid-market PE, leaving significant capital without a home. This is a frustration and an opportunity: PE firms that build sector knowledge and relationships now will be better positioned when those assets mature.

Why is PE hesitating to invest?

Private equity's hesitation is not irrational. The sector presents a set of challenges that do not sit easily within a typical PE model.

Government procurement cycles are long and unpredictable. The UK's Defence Investment Plan (DIP) has been delayed and UK Defence Secretary, John Healey, resigned in June 2026, leaving investors without clarity on which programmes will be funded and where money will flow. 

Even when spending commitments are made, capital tends to reach the primes first and take 12 to 18 months to trickle down to the smaller players in the supply chain. Contracts often come with limited guarantees: a manufacturer may win a place on a programme without any certainty of actual orders.

Then there is Limited Partner buy-in. Most private equity funds operate under 10-year agreements with their Limited Partners, many of which include restrictions on the types of businesses a fund can back. Defence has historically sat in an uncomfortable position for many institutional investors, and while sentiment is shifting, the constraints have not been widely tested. Where properly defence-focused PE deals have been completed, they tend to happen quietly. 

Three ways mid-market PE can back UK aerospace and defence

The above structural barriers are not reasons to stay on the sidelines indefinitely. Here are three plays private capital can make right now: 

1. Dual use: serving two markets. The most discussed route into defence for PE is dual-use businesses: companies with products or services that serve both civil and defence markets. The logic is compelling: civil revenues provide downside protection and a functioning commercial business, while defence represents upside optionality as spending increases. It also keeps exit options open. In three to five years, if defence spending has accelerated, a trade buyer may pay a premium. If not, the civil business should still command interest.

• In April 2026, Trive Capital, a Dallas-based PE firm, invested in Oxfordshire manufacturer Polar Technology, which produces composite and metallic components for aerospace, defence, automotive and medical markets.
• In the same month, Triton Partners, a European mid-market investor, agreed to acquire Integris Composites, a global manufacturer of lightweight armour and protection solutions serving defence OEMs, law enforcement agencies and aerospace customers. 

2. Manufacturing roll-ups: a fragmented, under-invested market. The less glamorous but arguably more natural play for mid-market PE lies in defence manufacturing. The UK's defence supply chain includes a large number of family-owned, sub-£10 million EBITDA businesses. Many are well-established but have not had the opportunity to invest in technology, systems and operational efficiency. The market is fragmented and there is an opportunity to build platform assets through buy-and-build strategies and investing in operational improvement. This is precisely the kind of value creation that PE does well. 

The supply chain is not a London story. Most defence-supported jobs sit outside the capital and the South East, with concentrations in the South West, Midlands, Scotland, Wales and Northern England, where the sector supports above-average wages and productivity. For mid-market PE, that could mean less competitive auction-driven processes, and investment that aligns directly with the government's commitment to making defence an engine for regional growth.

• In January 2026, PE-backed aerospace manufacturing consolidator Corvero acquired C&F Millier, a Bristol-based manufacturer of high-precision metal components for commercial aerospace and defence customers.
• In March 2026, Swedish investment company Evity Invest (a trade buyer) acquired Martin Precision, a Scottish precision engineering supplier to the aerospace, medical and energy sectors, including Rolls-Royce Aerospace, in a trade sale.

3. Peripheral services to defence and security. Training providers, consultancies, and professional services firms that work with defence and security clients offer a lower-friction entry point. These businesses are easier for LPs and ESG frameworks to accommodate, and they benefit from the same spending tailwinds without the procurement complexity of hardware or technology contracts.

• In May 2026, Bridgepoint and Bowmark Capital agreed the sale of Helio Intelligence, a political intelligence business with dedicated coverage of defence topics, to ECI Partners.

Beyond these three routes, there is a growing interest from infrastructure funds, whose longer investment horizons (10 to 20 years rather than three to five) may be better suited to the defence sector's timelines. This model is more established in the US, where private capital's appetite for aerospace and defence has historically been far stronger, but it is beginning to attract attention in the UK.