Executive Summary
The M&A market in Q1 2025 reflected broader geopolitical and economic volatility. President Trump’s return to office ushered in sweeping tariffs and deep federal budget cuts under the new Department of Government Efficiency (DOGE), driving shifts in government contracting and defense priorities. Despite these headwinds, sectors like defense systems and critical infrastructure saw continued investment and M&A activity, especially in areas aligned with national security and technology modernization.
Key Transactions
Notable acquisitions included:
- Anduril acquiring Numerica’s radar and C2 business to enhance its Lattice defense platform.
- Teledyne purchasing Excelitas’ Optical and Advanced Electronic Systems businesses for expanded defense and aerospace optics capabilities.
- General Atomics acquiring North Point Defense to bolster SIGINT capabilities.
- SMX acquiring cBEYONData to expand financial management offerings in the federal sector.
Market & Sector Performance
- Defense Primes outperformed, driven by strategic DoD funding shifts.
- Government Contractors underperformed, down 13.1% YoY, largely impacted by DOGE-led contract cuts.
- Cybersecurity remained a high-growth area with strong valuation multiples (avg. TEV/EBITDA of 29.6x), and 13 sector transactions were tracked this quarter.
Notable Trends
- Federal headcount reductions across major agencies (e.g., VA, DoD, IRS) reshaped the contracting landscape.
- DOGE claimed $140B in savings through asset sales and fraud prevention, significantly impacting consulting contracts.
- AI and cybersecurity integration advanced rapidly—U.S. Cyber Command saw meaningful gains from generative AI applications in threat detection.
- Maritime conflict and infrastructure vulnerabilities continued to stress global logistics, prompting renewed interest in critical infrastructure M&A.
