Defense electronics is one of the most attractive areas within aerospace and defense for private equity investments, given recent developments in Iran, Ukraine, Gaza, and other regions.

Pitchbook reported that the private equity market saw 27 deals in defense electronics in 2025, up 93% from the prior year and the second-highest deal count going back to 2017.

"Electronics-intensive capabilities are capturing a heavy share of global defense procurement dollars. We see spending in this area expanding as militaries prioritize sensing, electronic warfare, resilient communications, and edge computing over force expansion," the report stated.

The global defense electronics market was estimated at approximately $185 billion in 2025, growing at roughly 5% annually through 2035, according to Precedence Research.

Some of the leading defense electronics investors include J.F. Lehman & Co, Vance Street Capital, Audax Private Equity, Behrman Capital, and HCI Equity Partners, among others.

Some major defense electronics PE deals from the past include Honeywell's acquisition of CAES Systems from private equity firm Advent International for $1.9 billion.

Meanwhile, in November, Audax Private Equity sold its stake in Trexon to Amphenol for approximately $1 billion, which implied a revenue multiple of 3.5x based on 2025 revenue of roughly $290 million. Audax acquired its investment in Trexon back in January 2015, putting the hold time for this investment at roughly a decade.

Earlier this year, AE Industrial Partners announced plans to acquire a majority stake in L3Harris' Space Propulsion and Power Systems business at an enterprise value of approximately $845 million, underscoring sponsor appetite for electronics- heavy defense carveouts. L3Harris will maintain a 40% stake in the unit after the sale.

"Recent exits such as Trexon, BlueHalo, and CAES underscore the appetite among strategics for electronics capabilities that enhance vertical integration and program capture," the report said.

As the Iran war escalates, investors expect U.S. demand for air and missile defense systems to remain high.In a previous report by Pitchbook, the current circumstances may inspire private equity firms to pursue defense-related deals.

For private equity, the "most compelling opportunities remain in enabling components, electronic warfare subsystems, mission computing platforms, scalable sensing technologies, and fragmented testing and certification services." 

"These areas combine growth, defensibility, and realistic exit pathways. Sponsors positioned within these areas are likely to capture disproportionate value as primes seek consolidation and governments prioritize technological superiority," the report concluded.