Ryan Kirby, junior partner and Joseph Lakaj, analyst, at Alderman & Company assess the prospects for M&A activity in the commercial aerospace sector in 2026
The M&A landscape went through a fundamental transformation in 2025 as a new administration forced capital inward through aggressive tariffs and a shift towards domestic consolidation, even as a lenient US Federal Trade Commission (FTC) greenlit historic megadeals.
Within the Aerospace and Defence sector, we saw a tale of two halves with a sluggish, uncertainty-driven start to the year giving way to a resilient second-half recovery.
As the market shifted, we saw a ‘K-shaped’ recovery with smaller financial buyers facing liquidity bottlenecks and extended holding periods, while well-capitalised strategic buyers surged ahead.
This resulted in a high-premium environment in the US aviation market in early 2026, which has been evidenced by recent acquisitions from TransDigm, VSE, and HEICO.
Year-over-year deal volume increased in general M&A in 2025, setting all-time highs for both deal count and aggregate value.
At the beginning of 2025, the US Administration’s aggressive tariff regime had forced capital inward, leading to a shift in corporate strategy from cross-border expansion to domestic consolidation, but also forcing management to navigate a new set of tariffs that they did not intend to be implemented so quickly and fiercely.
However, as management was trying to understand tariffs and the impacts of their business, there was a significant change, with new leadership at the FTC that abandoned the ‘block-at-all-costs’ doctrine and is in favor of settlements and greenlighting megadeals that would have been seen as impossible a few years ago.
These megadeals include Union Pacific’s acquisition of Norfolk Southern for $85 billion and Netflix’s acquisition of Warner Bros for $83 billion. 2025 was a bumpy road for plenty of companies, especially in the M&A market; however, the question remains:
What is going on in Commercial Aviation M&A?
In our January article, we discussed the favorable internal attributes of commercial aviation companies that commanded premium multiples, with examples including customer diversification and manufacturers with programmatic exposure.
We now turn to the external market factors shaping commercial aviation M&A activity. In 2025, 398 transactions were completed in the overall aerospace and defense sector. Although the total deal volume of 398 transactions suggests a recovery, deal volume is down 14% from 2024 and down 37% from 2021’s peak.
However, the annual total dollar amount hides a significant shift that occurred throughout the year; while the first half of 2025 saw a decline due to the headwinds mentioned above, the second half of the year saw deal volume trend upward compared to the same period in 2024.
In the latter half of 2025, the Aerospace segment emerged as the primary engine of activity, accounting for roughly 38% of all M&A volume. This surge is due to the large external reaction to the aging fleet problem that is impacting the industry.
OEM backlogs are stretching out years, and both financial and strategic buyers are shifting their focus to the aftermarket and MRO segments. This is where we are seeing high premiums being paid for companies that offer programmatic exposure, particularly those supporting life extensions for commercial aircraft, as airlines scramble to keep older airplanes in the air to meet the continual growth in travel demand.
Although there was a slight decline in M&A activity in the commercial aviation industry in 2025, there has been a shift in buyer type, with strategic buyers accounting for 53% of total M&A transactions in 2025.
A noticeable trend in 2025 was an increase in difficulty for financial buyers to sell industrial companies in their portfolios (exit hurdles), which resulted in a tightening of liquidity for them and an inability to redeploy capital.
These extended holding periods led to cash being trapped within these companies and limited the ability of mid- and small-sized funds to raise new capital to invest, despite their interest in investing in the commercial aviation sector due to the impressive dynamics.
The impact on the commercial aviation landscape has been a notable K-shaped recovery in deal activity. While smaller financial buyers were sidelined by exit hurdles, larger mega-funds and well-capitalised strategic buyers stepped in.
These strategics, flush with cash and driven by a desire to enhance their supply chains, were able to outmaneuver PE firms on high-quality commercial aviation targets.
Examples of these strategic acquisitions include TransDigm Group’s acquisition of Jet Parts Engineering and Victor Sierra Aviation Holdings in January 2026, VSE Corporation’s acquisition of Precision Aviation Group in January 2026, and HEICO Corporation’s acquisition of EthosEnergy in February 2026.
These strategic acquisitions have also led to favourable valuation levels, such as VSE acquiring Precision Aviation Group at a 13.5x adjusted EBITDA multiple.
In the year ahead, we see continued growth in M&A activity in the commercial aviation sector for 2026 in the US. Assuming tariff regimes remain relatively predictable, demand for travel continues to grow, and there are no black swan events (eg COVID-19), we see no reason why the M&A activity will slow.
Anecdotally, Alderman & Company’s backlog today is the highest it has been in 25 years. Obviously, a backlog is not the same as closed deals. As the year unfolds, we will let you know how much of our current backlog converted into closed deals.