From Taboo to Imperative
For decades, European defense assets were radioactive for many investors - often screened out by ESG mandates as “sin stocks.” But the 2026 report reveals a stunning reversal in moral sentiment. Private Equity deal activity in European defense has surged nearly 100%, and Venture Capital deal volume has quadrupled.
The non-obvious driver? Public sentiment. For the first time, European public support for defense spending (78%) has actually eclipsed that of the US (76%). This shift has turned defense investing from a reputational risk into a “social imperative”. LPs are no longer asking “Why are you investing in weapons?”; they are asking “Why aren’t you helping secure European sovereignty?”
The “Drone Wall” Economy
While the US focuses on massive, expensive platforms, Europe’s innovation is being driven by a different economic reality: budget constraints. The report highlights a “Drone Wall” coalition of six nations. This signals that Europe’s “Anduril moment” won’t look like the US version.
Because European primes are subscale , there is a massive opening for disruptors like Helsing and Quantum Systems. The insight here is that the next unicorn won’t be a company building a better fighter jet; it will be a software company making “cheaper, faster, expendable” systems that fit constrained European budgets.
Project Bromo and the “Airbus of Tanks”
Finally, we are watching the death of “patchwork procurement.” For years, every European nation wanted its own tank and its own radio. Now, deals like Project Bromo (uniting Airbus, Thales, and Leonardo in space) signal the rise of the “European Champion” model.
Investors should stop looking for national players and start looking for the cross-border consolidators. The goal is no longer to support a local factory; it is to build the “Airbus of land systems”. If a company can’t scale across borders to meet this new sovereign architecture, it is essentially a zombie asset waiting to be acquired.
Read the complete report from Bain here - M&A in Defense: Why All Eyes Are on Europe