USA TRENDS AND DEVELOPMENTS Contributed by: W. Todd Carlisle, John H. Cooper, R. Michael Murphy and David W. Drum, Dentons
Aerospace and defence The outlook for M&A in the aerospace and defence sector in 2026 is strong, with expected acceleration in consolidation. The sector is positioned for strategic growth, driven by shifting national security priorities and accelerating innovation cycles. M&A has become a primary growth lever as buyers target assets that accelerate modernisation. Key drivers include: • increased global defence spending and geopoliti - cal tensions; • supply-chain resilience and vertical integration in aviation; • technological transformation in autonomy, space systems and advanced materials; and • strategic acquisitions by major prime contractors to expand capabilities. Deal activity has shown strong growth so far in 2026, with deal value up approximately 119% year-over- year and volume up about 67%. Strategic buyers are focusing on defence electronics, cyber capabilities, space and satellite technologies, and advanced man - ufacturing and propulsion. Major corporations are divesting underperforming assets to redeploy capital into defence tech, muni - tions and space, with proceeds from more than USD15 billion in global transactions being reinvested into high-growth segments. Private equity funds are deploying record capital into carve-outs and mid-tier defence suppliers, building scalable technology plat - forms for both military and civilian use. The M&A mar - ket for aerospace and defence is expected to grow from USD27.22 billion in 2025 to USD38.51 billion by 2035, exhibiting a Compound Annual Growth Rate (CAGR) of 3.53%. Pharmaceuticals and life sciences The pharmaceutical and life sciences sector enters 2026 with confidence and ample capital following a strong second half of 2025. M&A activity accelerated sharply in 2025, marking one of the busiest years on record. Key drivers include patent expiries for major drugs, the need for innovation in biotech, gene therapy and precision medicine, and the desire for external pipe -
line acquisition as R&D productivity pressures persist. Companies face an average of USD47 billion in global pharmaceutical revenue being at risk annually over the next four years due to patent cliff pressures, driving urgency for pipeline replenishment through acquisi - tions. Typical acquisition targets include small and mid-size biotech firms and novel therapeutic platforms such as cell and gene therapies, antibody-drug conjugates and AI-enabled drug discovery. Oncology, radiophar - maceuticals, cardio-metabolic conditions, CNS/neu - roscience and immunology remain at the forefront of M&A activity. Companies are prioritising bolt-on acqui - sitions and contingent value rights to bridge valuation gaps. The industry has an estimated USD2.1 trillion in available firepower, with deal making expected to continue accelerating through 2026. Real estate Real estate M&A is expected to regain momentum in 2026 as pricing clarity improves and investors shift from defensive positioning to selective deployment. The overall outlook is a gradual recovery, driven by stabilising interest rates improving financing condi - tions, distressed asset opportunities after the com - mercial real estate downturn, and institutional capital returning to the sector. Public-to-private REIT transactions and market con - solidation are expected to accelerate as companies pursue scale and strategic asset repositioning. Global capital is reallocating away from traditional real estate assets such as office and retail towards infrastructure- adjacent assets, including data centres, logistics net - works and residential-oriented properties. Data cen - tres remain the top prospect for investment in 2026. Global real estate investment is forecast to increase by 15% in 2026, with deal values through the first nine months of 2025 already up 6% year over year. Technology adoption is becoming critical, with 53% of real estate CEOs indicating a clearly defined roadmap for AI initiatives. Private equity funds and institutional investors are expected to drive deal activity, espe - cially in the middle market, as firms increasingly use acquisitions to expand capital markets capabilities and geographic presence.
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