Dear Friends,
As we close the books on 2025 and enter the new year, Q4 reinforced what many in
the market have been feeling for the past several quarters: Aerospace, Defense, and
Space are operating from a position of strength. Public market sentiment remained
constructive, private equity activity reached a new high watermark, and strategic
buyers continued to pursue scarce, differentiated capabilities – particularly where
supply is constrained and demand is increasingly programmatic. At KAL, 2025 was a
record year, with 15 closed transactions totaling over $1 Billion of aggregate enterprise
value, plus an additional closing in the first week of 2026.
In Washington, the quarter was defined by a sharper “America First” posture and an
intensifying focus on the Western Hemisphere, industrial resiliency, and rearmament
speed. Defense has increasingly become as much an industrial capacity conversation
as a policy debate – favoring businesses that can expand throughput, qualify quickly,
and deliver reliably at scale. In that context, headlines around a potential stepchange
in defense spending (and a more direct push on contractor performance
and investment) further highlight the direction of travel: acceleration of production,
modernization, and supply chain security.
Space remains a clear beneficiary. SDA’s Tranche 3 Tracking Layer awards are
another signal that proliferated LEO architectures are becoming the default for missile
warning and tracking – supporting multi-year demand across payloads, buses,
integration and test, and enabling electronics. At the same time, 2025 highlighted the
growing weight of commercial space: scaled platforms continue to pull capital and
attention, and renewed IPO speculation around category leaders has kept investor
focus on the sector’s most durable franchises.
Commercial aerospace improved, but unevenly. Supplier optimism has risen alongside
progress on key production programs, yet the widebody ecosystem remains more
fragile given complexity, lower volumes, and tighter supplier concentration. Across
both Airbus and Boeing, engines and select supply chain constraints continue to be
the gating items—reinforcing the premium placed on businesses with qualification
barriers, capacity headroom, and meaningful aftermarket exposure.
Against this backdrop, the M&A environment remains highly favorable for high-quality
A&D assets. Buyers are paying up for mission alignment, scarcity, and durability – and
the gap between “good” and “great” has rarely been wider. For owners considering a
sale or recap, this remains an attractive window to explore options, particularly for
platforms positioned in priority defense programs, space architectures, and
constrained aerospace supply chains.
As always, we appreciate your partnership and welcome the opportunity to connect.
Sincerely,
Trevor Bohn & Ryan Murphy