Publication 02.11.2026 Insights Featured in Private Equity International: Private Equity Defense Report Insights Featured in Private Equity

European defense is entering a structurally stronger phase as strategic autonomy, domestic procurement and technological change redirect capital toward Europe’s industrial base.

• European countries are increasing defense budgets and focusing more on European industrial capacity, supply security and production readiness; historically, only around 18 percent of European defense budgets was spent on Europe-made equipment.
• Denmark bought the Franco-Italian SAMP/T NG air-defense system from Eurosam, the Thales-MBDA joint venture, while Italy contracted Airbus for six A330 multi-role tanker transport aircraft.
• Investor appetite has broadened beyond specialist funds to pension funds, family offices, banks, insurers and some generalist private-equity firms, although new capital has also pushed valuations higher.
• Tikehau balances defense with commercial aviation because the two businesses have historically followed different cycles; both are currently benefiting from an upswing, an unusual situation in the authors’ careers.
• The Ukraine and Middle East conflicts have increased the importance of drones and counter-drone systems, exposing vulnerabilities in some armored platforms while leaving continued roles for fighter jets and conventional defense.
• Tikehau says it has made more than 40 investments in the sector since 2020 and stresses that regulatory expertise, export controls, government conditions and deep industry relationships are essential to avoid mispricing.

Takeaway: European defense offers durable growth and export opportunities, but investors should combine conventional and new-defense exposure, diversify across aerospace and defense, and remain selective because valuations, technological disruption and regulatory constraints create material risks.