Merger and acquisition activity in Israel's defense technology sector jumped to $3.26 billion in the first half of 2026, an 8.5-fold increase from $384 million in 2025, according to a report by the American consulting giant Frost & Sullivan exclusively seen by Defense & Tech by The Jerusalem Post.
The report, presented this week at an industry event in Tel Aviv hosted by law firm Gornitzky in collaboration with defense-focused investment fund Aurelius, found a growing demand for Israeli military technologies, particularly in autonomous systems, sensors, robotics and counter-drone technologies.
It examined 44 announced mergers and acquisitions in Israel's aviation and defense sectors between 2023 and 2026, excluding cyber and cyber intelligence transactions. Deal values were publicly disclosed in 22 of those transactions, totaling about $4.1b. The median disclosed deal size was approximately $37.8m.
While, in part, a small number of large acquisitions drove the dramatic increase in the 2026 deal value, Frost & Sullivan said the data also point to a broader trend of defense companies seeking to acquire technologies rather than develop them internally.
"The market is increasingly focused on buying capabilities that can close operational gaps, accelerate time to market and respond quickly to evolving defense requirements," the report said.
US-based acquirers accounted for roughly 45% of the transactions reviewed, making them the largest buyer group. Israeli purchasers represented about 30% of acquisitions, while European companies accounted for approximately 11%.
More than half of the deals were concentrated in three sectors: defense electronics and sensors, unmanned aerial vehicles and autonomous systems, and ground systems and robotics.
According to the report, the wars in Ukraine, the Persian Gulf, Lebanon, and Gaza are not the only reason why the growth of the Israeli defense tech industry has accelerated; the technology has proven its effectiveness and ability to adapt on the battlefield; Israeli defense technologies have attracted increased interest from international buyers for this reason as well.
Not slowing down
Ariel Sagee, a partner at Gornitzky GNY who also leads the firm's defense and defense regulation practices, linked the sector’s growth to recent conflict and tense global geopolitics.
“The war in Ukraine highlights the need for stable international alliances to ensure the supply chain. Israel cannot be isolated. Ukraine is under two-way pressure - Chinese drone components on the one hand and SpaceX's satellite technology on the other. These two forces pull at it and illustrate the importance of international alliances in building stable defense solutions,” he said.
Irit Nudelman, vice president and head of defense consulting for Israel and Europe at Frost & Sullivan, said she expects deal activity to remain strong.
"We will continue to see significant deals in the coming years, primarily in the fields of anti-drone systems, robotics, underwater systems, space and autonomy," she said, adding that the defense sector is becoming more receptive to technologies developed by start-ups and that maturation of the defense innovation market is likely to continue.
Although US and Israeli strategic buyers remain the dominant acquirers, Nudelman said European and Asian firms are more often pursuing partnerships, joint ventures and targeted investments rather than full acquisitions.
‘The Democratization of lethality’
The event also featured a discussion between retired Maj.-Gen. Amir Eshel, a partner at Aurelius and a former commander of the Israel Air Force, and Sagee.
Eshel noted that technological advances have expanded access to military capabilities once limited to nation-states.
"You can call it the democratization of lethality," Eshel said. "Once, states were the sole sovereign that controlled war capabilities; today, organizations and individuals also have state capabilities."
He also warned against weakening Israel's domestic defense innovation ecosystem by relocating early-stage companies abroad. He stressed the importance of strengthening supply-chain partnerships rather than pursuing complete self-sufficiency.
"Full Israeli defense production independence is not possible," Eshel said. "We do not have the raw materials, and there is also a lack of workforce. Nevertheless, Israeli capability can be strengthened, and additionally it is right to create partnerships for the supply chains required by Israel."