Datasite was proud to sponsor and attend the 2025 ACG Aerospace & Defense Middle Market Leadership Forum in Los Angeles, California, which featured panels such as “Dealmaking in a Shifting Defense Landscape,” “Beyond the Horizon: M&A Opportunities in Aerospace and Space Exploration,” and “What Do the Bankers Think?”. Speakers from firms like Guggenheim Securities, RTX, Airbus, and many others shared insights on what’s shaping A&D dealmaking today.

Across conversations on and off the stage, one theme was clear: the Aerospace & Defense (A&D) market is firing on all cylinders, from commercial to defense to space. For dealmakers, that means opportunity and complexity. Here are our key takeaways from the event.

1) Valuations Are High and Forward‑Looking

Multiples for quality A&D assets remain elevated, often in the high teens to 20x for sole‑source, high‑IP businesses with strong aftermarket exposure. Buyers are increasingly underwriting forward EBITDA (2026–2027) rather than LTM, which means sellers need airtight forecast support and buyers must pressure‑test rate‑ramp assumptions. Organizing variance bridges, milestone maps, and sensitivity analyses early can prevent delays and build confidence with bidders—especially when timelines are compressed.

This trend is underpinned by historically high backlogs at Boeing and Airbus and stabilized OEM build‑rate trajectories, which have narrowed bid–ask spreads and unlocked more OE‑aligned processes. On the aftermarket side, assets with differentiated positions in complex aircraft zones and margins in the high teens or low 20s continue to command premiums. In short, forward visibility and aftermarket mix are driving valuations higher.

2) Carve‑Outs Dominate Deal Flow

Corporate portfolio reshaping is fueling carve‑outs from primes and tier‑one suppliers, and sellers often prioritize speed and certainty over squeezing the last dollar. That puts pressure on buyers to execute quickly without cutting corners. Carve‑outs require stand‑alone financials, TSA scopes, IT disentanglement plans, and export/security compliance documentation. Having these ready before launch compresses timelines and reduces execution risk, which is critical when competitive processes hinge on readiness.

Expect more carve‑outs from U.S. primes like RTX and European corporates such as Airbus and Safran, as portfolio optimization accelerates. In these processes, speed and certainty often beat top‑tick price, provided sellers show customer novation paths and facility/security clearances upfront.

3) Synergy Underwriting Is Driving Premiums

Bundling complementary assets in simultaneous processes is turning mid‑teens multiples into 20x+ prints because buyers can underwrite synergies upfront—cost saves, footprint consolidation, pricing power. Processes that highlight synergy potential early, with SKU‑level and customer overlap data shared securely under NDA, give bidders confidence to pay up. Integration roadmaps and credible synergy models are now expected in well‑run auctions.

Recent examples discussed at the Forum - such as CAM, Novaria, and TriMas coming to market together - showed how simultaneous processes allowed sponsors to capitalize synergy in financing memos, lifting outcomes from ~13–14x to 18–20x. Expect more club deals and even select IPO exits in 2026 as public valuations for A&D leaders remain strong.

4) Supply Chain & Compliance Are Now Valuation Levers

Buyers are scrutinizing component provenance and the ability to re‑shore or friend‑shore critical parts more than ever. For sellers, demonstrating supply‑chain resilience can protect value; for buyers, it’s a diligence must‑have. BOM‑level provenance maps, alternative sourcing plans, and compliance certifications should be ready before going to market. These details increasingly influence valuation and can determine whether a deal closes smoothly or stalls.

Panelists flagged Chinese component dependencies - electronics, magnets, robotics - as potential disqualifiers for defense installs. OEMs and Tier‑2s are also pushing to simplify supplier networks, rewarding platforms that consolidate Tier‑3s and demonstrate quality and capacity. Cross‑border manufacturing (e.g., Mexico) can help, but tariff and trade‑agreement risk must be assessed at the program level.

5) Small‑Business Policy Shifts Create Roll‑Up Plays

Increased SDVOSB spend targets and higher SBA size standards mean more room for consolidation without losing “small” status - a roll‑up opportunity for PE and strategics. Documenting certification durability and size‑standard compliance across five‑year averages is essential to avoid surprises post‑close. Buyers will expect clarity on eligibility, and sellers who prepare these details upfront will keep momentum intact.

The NDAA 2024 uplift from 3% to 5% SDVOSB spend and formal SDVOSB certification are already reshaping capture strategies. Draft SBA size‑standard increases (covering ~270 NAICS codes) expand eligibility while raising the bar on documentation - an important diligence workstream in A&D services.

6) Outlook: Busy Pipelines, Compressed Timelines

With carve‑outs, OEM‑aligned exits, continuation vehicles, and select IPOs in play, 2026 looks active. But prep bottlenecks - quality of earnings and consultant bandwidth - could slow processes; front‑loading readiness is key. Clean data, organized diligence, and clear compliance documentation sustain trust and protect value when timelines tighten.

Tailwinds include Europe’s multi‑year rearmament, Indo‑Pacific naval readiness (shipbuilding/repair/submarine ecosystems), and munitions restocking. In space, expect consolidation among smaller players to assemble credible stacks aligned to Space Force priorities (AI for ops, autonomy/robotics, in‑orbit servicing, propulsion, optical comms). On AI, investors want measurable factory‑level lift - robots and cobots are delivering tangible wins as costs fall, while broad AI margin improvement in traditional manufacturing remains nascent.

Key Takeaways for Middle‑Market Deal Teams

• Sellers: Forecast credibility and carve-out readiness are non-negotiable.
• Buyers: Underwrite forward earnings, synergy, and supply-chain resilience.
• Everyone: Compress timelines without sacrificing diligence; structured preparation is your edge.