With geopolitical tensions on the rise, many countries are increasing their defense spending. This provides opportunities for investment banks to advise and raise capital for companies in the defense industry. Investment banks can help defense firms through advisory work on mergers and acquisitions, equity and debt offerings, and other strategic matters. By leveraging their expertise and connections, investment banks facilitate transactions and access to capital for defense companies. This allows the industry to develop new technologies and capabilities in line with evolving defense requirements. Major investment banks like Goldman Sachs, Morgan Stanley, and JP Morgan have dedicated teams to serve aerospace, defense and government services clients. For example, when United Technologies acquired Rockwell Collins in a $30 billion deal, Goldman Sachs and Morgan Stanley acted as financial advisors. As defense companies pursue consolidation, investment banks will continue to play an instrumental role.
M&A and capital raising activities by investment banks in the defense industry
Investment banks are heavily involved in mergers and acquisitions within the defense industry. As countries aim to enhance their military capabilities, defense contractors often pursue acquisitions to obtain new technologies and expand their offerings. For instance, Raytheon and United Technologies merged in 2020 to form Raytheon Technologies, with Citigroup and RBC Capital Markets advising on the $100 billion deal. The combined firm provides a wider range of defense products and services. In another major deal, L3 Technologies and Harris Corporation merged to create L3Harris Technologies, a defense technology leader. Goldman Sachs advised L3 while JP Morgan advised Harris. Investment banks help defense firms identify acquisition targets, conduct valuation analysis, negotiate deals, arrange financing, and navigate regulatory approvals. This enables consolidation that strengthens the capabilities of defense contractors. In addition to M&A advice, investment banks help defense firms raise capital through equity and debt offerings. Access to capital allows these companies to fund R&D, expand production capabilities, and pursue growth opportunities. Defense companies undertake IPOs, follow-on offerings, and issue corporate bonds with the help of investment bank underwriters. For example, Goldman Sachs and Morgan Stanley led the IPO of Palantir, a data analytics provider to government defense and intelligence agencies.
Advising defense firms on cybersecurity, space, hypersonics and other emerging areas
Rapid technological advances are transforming the defense landscape. Investment banks provide advice as contractors pursue new opportunities in areas like cybersecurity, space systems, hypersonic missiles, artificial intelligence, and quantum computing. For instance, Morgan Stanley helped satellite operator ViaSat acquire RigNet, a provider of cybersecurity and communications for remote energy and maritime assets. The deal enhances ViaSat’s security offerings. Investment banks also advise traditional defense contractors as they build up capabilities in new domains like space. As defense spending shifts toward next-generation technologies, investment banks help contractors adapt through well-informed acquisitions and partnerships. Beyond M&A, investment banks also furnish capital raising and risk management expertise as contractors develop sophisticated new weapon systems and capabilities.
Navigating defense procurement processes and policy developments
Succeeding in the defense industry requires understanding complex government procurement processes and policy developments. Investment banks offer valuable perspectives in these areas. They closely track government budgets, appropriations, contract awards, and geostrategic threats that drive defense spending. This helps contractors position themselves to win business in priority capability areas that attract funding. Investment banks also have regulatory expertise to help defense firms navigate procurement rules, export controls, and national security reviews. In addition, they provide advice on developments like the expansion of space organizations in various countries. Overall, investment banks serve as trusted strategy advisors, equipped to guide defense contractors through fluid policy and spending environments.
Investment banks enable critical mergers, acquisitions, and capital raising activities that allow defense contractors to rapidly adapt and provide cutting-edge capabilities. With geopolitical headwinds requiring heightened military readiness, investment banks will continue advising defense firms on achieving strategic goals.