Dear Friends,
The second quarter of 2026 confirmed that Aerospace, Defense, and Space remain firmly in a growth cycle. A&D equities finished the first half ahead of the S&P 500, up 27% over the last twelve months, while Q2 deal volume of 127 transactions puts the sector on pace for its highest annual total in at least a decade. KAL was pleased to contribute to that momentum, closing three transactions during the quarter: Kittyhawk’s sale to Machine Sciences, Behrman Capital’s acquisition of Metallizing Service Company, and Adaptive Dynamics’ sale to DTC.
A Record NDAA Locks In Modernization
In Washington, the quarter was defined by a record-setting $1.15 trillion NDAA, now through the House of Representatives, that would lock in a modernization budget by design. Procurement and RDT&E are growing far faster than sustainment accounts, with multiyear authorities across fighters and shipbuilding providing rare volume visibility. At the same time, the Iran campaign consumed years of missile output, and FY2027 replenishment requests have surged across all major programs. Scarce, qualified upstream capacity in propulsion, seekers, actuation, and structures will increasingly determine the pace of deliveries, and we expect capital to keep flowing to businesses positioned in those constraints.
Golden Dome and the SpaceX IPO Reshape Space
Space continues to command outsized attention. SpaceX’s record-setting IPO, the largest in history, headlined a wave of capital formation, while the Golden Dome’s space layer is taking shape with meaningful funding behind it. Investors are rewarding production-ready platforms with exposure to durable, well-funded programs.
Boeing’s Best Quarter Since 2018, Tempered by the 777X
Commercial aerospace continued its uneven recovery. Boeing posted its highest quarterly aircraft volume since 2018, and dealmaking remained concentrated in MRO and aftermarket assets with sticky, recurring revenue. The 777X remains a reminder that execution, not demand, is the constraint. Farnborough told a similar story: orders came in below forecasts, but combined backlogs surpassing 16,000 aircraft and a sharply expanded defense presence underscored the durability of demand.
A Wide-Open Window for Sellers
Against this backdrop, the M&A environment for high-quality A&D assets remains as constructive as we have seen. Buyers continue to pay premiums for scarcity, qualification barriers, and exposure to priority programs, and the window for owners considering a transaction remains wide open.
As always, we appreciate your partnership and welcome the opportunity to connect.
Sincerely,
Trevor Bohn & Ryan Murphy