Frost & Sullivan: Israeli Defense M&A Jumps to $3.26 Billion

Merger and acquisition activity in Israel's defense sector reached $3.26 billion in the first half of 2026, a sharp rise from $384 million in the same period last year.

The figures come from a Frost & Sullivan report presented in Tel Aviv this week. The analysis covers 44 announced deals in the aviation and defense sectors from 2023 through 2026, excluding cyber transactions. In 22 of those deals, values were publicly disclosed, totaling about $4.1 billion. The median disclosed deal size stood at approximately $37.8 million.

The report identifies a shift in strategy where defense firms prefer to buy existing technologies rather than build them in-house. US companies accounted for roughly 45% of the transactions, making them the largest buyer group. Israeli purchasers represented about 30% of deals, while European firms made up approximately 11%.

More than half of the transactions focused on three specific areas: defense electronics and sensors, unmanned aerial vehicles and autonomous systems, and ground robotics. The data suggests that battlefield effectiveness, not just conflict, is driving international interest in Israeli hardware.

Ariel Sagee, a partner at law firm Gornitzky, linked the growth to global geopolitical tensions. He noted that the war in Ukraine underscores the need for stable international supply chains. “Israel cannot be isolated,” Sagee said, citing pressures from Chinese drone components and SpaceX satellite technology.

Irit Nudelman, vice president of defense consulting for Israel and Europe at Frost & Sullivan, expects deal activity to remain strong. She anticipates continued deals in anti-drone systems, robotics, underwater systems, and space. Nudelman noted that European and Asian firms are increasingly pursuing partnerships and joint ventures rather than full acquisitions.

Retired Maj.-Gen. Amir Eshel, a partner at investment fund Aurelius, described the shift as “the democratization of lethality.” He argued that organizations and individuals now possess capabilities once held only by states. Eshel warned against moving early-stage Israeli companies abroad, stating that full production independence is unattainable due to a lack of raw materials and workforce. He emphasized the need for supply-chain partnerships over self-sufficiency.