Niels Buus has recently taken on the role of Industry Group Leader for the Defence, Space & Cybersecurity sector at M&A Worldwide. With extensive experience and insights into this highly dynamic industry, he shares his perspective on the current market outlook, cross-border M&A opportunities, regulatory challenges, and the keys to success in this sensitive yet fast-growing sector.
How would you describe the current market outlook and growth potential in the defence and security sector?
The sector is expanding sharply as defence budgets rise worldwide. Although funds take time to flow into business areas, this budget growth is a key driver. The industry encompasses multiple overlapping segments, including aerospace, naval, vehicle, ammunition, and space, where many companies operate across several areas simultaneously.
We see especially strong growth in unmanned aerial vehicles (drones) and naval vessels, with many countries rebuilding their navies and investing in technologies like unmanned naval systems. Cybersecurity and general security are also becoming critical, reflecting how geopolitical tensions are reshaping the sector.
What are the main risks and opportunities for cross-border M&A in defence?
Cross-border M&A is complex, particularly in defence, because of geopolitical and regulatory hurdles. At the same time, these deals offer strong growth opportunities, especially in Europe. Industrial participation and offset restrictions often drive cross-border activity in smaller European markets where no major strategic players exist.
However, security concerns limit collaboration in sensitive areas—especially nuclear-related fields—making some transactions nearly impossible. We also see Europe shifting toward producing key defence systems internally, which encourages regional M&A and collaboration. Understanding evolving rules and restrictions is essential to balance risks and seizing opportunities.
How do you see the regulatory environment shaping the sector?
Unlike other industries that are moving toward lighter regulation, defence will continue to tighten controls. While we may not see a surge of new laws, enforcement around handling sensitive information and collaboration is becoming stricter.
For instance, European companies cannot fully own or manage U.S. firms working with classified data, and similar reciprocal measures are emerging in Europe. This trend pushes Europe to strengthen its own defence ties and reduce reliance on overseas suppliers. Similar dynamics exist in Australia and New Zealand, while Asian partners like Japan and South Korea are expected to deepen cooperation with Europe.
Which regions are most attractive for investment?
Europe, North America, and parts of Asia stand out. Europe, in particular, offers strong prospects for private equity due to rising defence budgets and regional collaboration. That said, investors should focus on their home regions, given the regulatory and geopolitical realities—especially in the U.S. private equity space, where cross-region moves are restricted.
Looking ahead, Japan and South Korea will play an increasingly important role, while South America currently has limited influence on global defence dynamics.
What are the keys to success in the defence sector M&A?
Success requires deep sector knowledge, patience, and trust. Defence transactions are very different from fast-paced sectors—they carry longer timelines and deal with life-or-death products. Trustworthiness and reputation are critical, as the sector is small and ethically demanding. Recent events, such as the Ukraine war, have made defence investments more widely accepted, as nations prioritise resilience and production capacity.
Deal teams must show thoroughness and respect for the seriousness of this industry, balancing business rigour with ethical responsibility.
Finally, how important is collaboration and credibility in this field?
They are absolutely vital. While some believe they can succeed on their own, the reality is that trust and partnerships create strength in the defence ecosystem. This community is closely connected across borders and places great value on known, credible players.
Strong alliances not only enhance competitive advantage but also reflect the military principle of collective strength. For anyone in the sector, building trusted relationships is key to establishing a solid and credible market presence.