Aerospace & Defense (5.1) · Industry Index

Overview

Aerospace & Defense covers the manufacturers and service providers behind aircraft, defense systems, and space — commercial aviation manufacturing, aerospace structures and MRO, avionics and defense electronics, missiles and munitions, naval and ground systems, space, drones, and defense services. It is a large, consolidated, and strategically critical sector.

The two halves have diverged sharply: defense is buoyed by geopolitical tensions and rising budgets (munitions replenishment for Ukraine, shipbuilding, missiles), while commercial aerospace fell into a deep 2017–22 trough from the Boeing 737 MAX grounding and the pandemic before beginning to recover. The sector is dominated by primes (Boeing, Airbus, Lockheed, RTX, Northrop, General Dynamics) with active M&A in defense, space, drones, and the supply chain.

Market snapshot

Market size: ~$318B
Growth: ~-1.8%CAGR (2017–22, nominal)
Companies: ~3,016 firms

Firms by employee count

56.4% of firms have fewer than 20 employees: 1,698 micro-businesses, below most mandates.

The investable universe1,312 firms with 20+ employees

20–99: 69653%
100–499: 31024%
500+: 30623%

Percentages are of the 20+ employee universe. 20–99 and 100–499 are the lower-middle market; 500+ is at scale.

Sector revenue fell over 2017–22 even as defense and space budgets grew — the airframe collapse is large enough to pull the whole sector negative on its own. The cost base is assets, not headcount: payroll runs about a fifth of revenue, and roughly one firm in ten clears 500 employees, an unusually deep strategic-buyer pool for manufacturing.

NAICS 325920, 332992, 332993, 332994, 334511, 336411, 336412, 336413, 336414, 336415, 336419, 336611, 336992. U.S. Census Bureau — 2022 Statistics of U.S. Businesses; U.S. Census Bureau — 2022 Economic Census.

Business model & economics

Revenue model

Program and platform sales, aftermarket/MRO, and defense contracts

Key economics

Revenue per firm: $105,338,611
Revenue per employee: $446,295
Employees per firm: 238.7
Recurring revenue: Moderate–High
EBITDA margin: Program- and aftermarket-mix-dependent
Capex intensity: High

Characteristics

Scale-driven — payroll is only 21% of revenue; the cost base is assets, not headcount
Deep strategic-buyer pool — 306 firms exceed 500 employees, so a scaled asset has trade buyers
Defense buoyed by geopolitical tensions and rising budgets.
Commercial aerospace recovering from a deep 2017–22 trough.
Consolidated around primes; high-margin aftermarket/MRO.

NAICS 325920, 332992, 332993, 332994, 334511, 336411, 336412, 336413, 336414, 336415, 336419, 336611, 336992. U.S. Census Bureau — 2022 Statistics of U.S. Businesses; U.S. Census Bureau — 2022 Economic Census.

Geographic concentration

Aerospace and defence employment is among the most geographically concentrated in manufacturing: engine work in Connecticut, airframe and structures work in Kansas and Washington, and naval construction in Mississippi.

ConnecticutKansasWashingtonMississippi

U.S. Census Bureau — 2022 County Business Patterns (employment by state), NAICS 325920/332992/332993/332994/334511/336411/336412/336413/336414/336415/336419/336611/336992. Concentration shown by location quotient.

M&A deal context

Deal activityHigh

Who’s acquiring

Defense & aerospace primes
PE-backed supply-chain consolidators
Space, drone & defense-tech strategics

What’s driving deals

Defense-budget growth and munitions replenishment.
Supply-chain roll-ups and prime consolidation.
Space, drone, and new-defense-tech M&A.

Aerospace & Defense