Israeli defense tech deals reach $3.26 billion in six months

Merger and acquisition activity in Israel's defense technology sector reached $3.26 billion in the first half of 2026. This figure represents an 8.5-fold increase compared to the $384 million recorded in 2025. The data comes from a report by Frost & Sullivan that was presented at an industry event in Tel Aviv.

The report analyzed 44 announced transactions in the aviation and defense sectors between 2023 and 2026. It excluded cyber and cyber intelligence deals. In 22 of those transactions, the values were publicly disclosed, totaling approximately $4.1 billion. The median size for these disclosed deals was about $37.8 million.

US-based companies accounted for roughly 45% of the reviewed transactions, making them the largest group of buyers. Israeli purchasers represented about 30% of the acquisitions, while European companies held an approximately 11% share. More than half of the deals focused on three specific areas: defense electronics and sensors, unmanned aerial vehicles and autonomous systems, and ground systems and robotics.

Frost & Sullivan noted that a small number of large acquisitions contributed to the surge in 2026. However, the data also reflects a wider trend where defense companies prefer acquiring existing technologies over developing them in-house. The report stated that the market is increasingly focused on buying capabilities that close operational gaps and accelerate time to market.

Irit Nudelman, vice president and head of defense consulting for Israel and Europe at Frost & Sullivan, expects deal activity to remain strong. She cited anti-drone systems, robotics, underwater systems, space, and autonomy as key fields for future transactions. She added that the sector is becoming more receptive to technologies developed by start-ups.

Ariel Sagee, a partner at Gornitzky GNY, linked the sector's growth to recent conflicts and global geopolitics. He argued that the war in Ukraine highlights the need for stable international alliances to ensure supply chains. Sagee noted that Israel cannot be isolated and that international alliances are important for building stable defense solutions.

Retired Maj.-Gen. Amir Eshel, a partner at Aurelius, discussed the concept he termed the democratization of lethality. Eshel observed that technological advances have expanded access to military capabilities previously limited to nation-states. He warned against weakening Israel's domestic innovation ecosystem by relocating early-stage companies abroad.

Eshel stressed the importance of strengthening supply-chain partnerships rather than pursuing complete self-sufficiency. He stated that full Israeli defense production independence is not possible due to a lack of raw materials and workforce. He said it is right to create partnerships for the supply chains required by Israel.