Defense Tech Mergers Hit Record High

Israel’s defense technology sector has experienced a rapid expansion in deal activity.

Mergers and acquisitions in the industry totaled $3.26 billion in the first half of 2026, according to a new report.

This figure represents an increase of approximately 8.5 times compared to the $384 million recorded in 2025.

Frost & Sullivan presented the findings this week at an industry event in Tel Aviv.

The event was organized by the law firm Gornitzky in collaboration with Aurelius, a defense-focused investment fund.

The report analyzed 44 announced mergers and acquisitions in Israel’s aviation and defense sectors between 2023 and 2026.

Researchers excluded cyber and cyber intelligence transactions from the study.

Publicly disclosed prices were available for 22 of those deals, which summed to about $4.1 billion.

The median value of those disclosed transactions was roughly $37.8 million.

Several large acquisitions contributed to the 2026 increase, but the data also indicates a structural shift in the industry.

Defense companies are increasingly purchasing technology rather than developing it in-house.

The report noted that the market focuses on buying capabilities to close operational gaps and accelerate time to market. American buyers led the group, participating in about 45% of the transactions studied. Israeli purchasers accounted for approximately 30% of deals, while European companies made up about 11%. More than half of all transactions fell into three categories: defense electronics and sensors, unmanned aerial vehicles and autonomous systems, and ground systems and robotics. Frost & Sullivan attributed the growth to rising demand for Israeli military technologies, including autonomous systems and counter-drone tools. The report stated that wars in Ukraine, the Persian Gulf, Lebanon, and Gaza are not the sole drivers of this growth. Israeli technologies have demonstrated effectiveness and adaptability on the battlefield, attracting interest from international buyers. Ariel Sagee, a partner at Gornitzky GNY who leads its defense practices, linked the growth to recent conflict and tense geopolitics. He said the war in Ukraine highlights the need for stable international alliances to secure supply chains. Sagee noted that Ukraine faces pressure from Chinese drone components and SpaceX satellite technology. "Israel cannot be isolated," he said. Irit Nudelman, vice president and head of defense consulting for Israel and Europe at Frost & Sullivan, expects the pace to continue. She predicted continued deals in anti-drone systems, robotics, underwater systems, space, and autonomy. Nudelman added that the sector is becoming more open to start-up technologies. US and Israeli strategic buyers still dominate acquisitions, while European and Asian firms prefer partnerships and targeted investments. Retired Maj.-Gen. Amir Eshel, a partner at Aurelius and former commander of the Israel Air Force, participated in a discussion at the event. Eshel described technology as widening access to capabilities once reserved for nation-states, calling it the democratization of lethality. He cautioned against moving early-stage companies abroad, arguing for stronger supply-chain partnerships. "Full Israeli defense production independence is not possible," he said, citing a lack of raw materials and workforce.