Deal activity in Israel's defense technology sector has surged this year. According to a Frost & Sullivan report seen exclusively by Defense & Tech by The Jerusalem Post, mergers and acquisitions reached $3.26 billion in the first half of 2026, compared with $384 million in 2025, an increase of about 8.5 times.
The consulting firm's findings were presented this week at an industry event in Tel Aviv organized by the law firm Gornitzky in collaboration with Aurelius, an investment fund focused on defense. The report points to rising demand for Israeli military technologies, especially autonomous systems, sensors, robotics and counter-drone tools.
Researchers reviewed 44 announced mergers and acquisitions in Israel's aviation and defense sectors between 2023 and 2026, leaving out cyber and cyber intelligence transactions. Prices were publicly disclosed for 22 of those deals, which together totaled about $4.1 billion. The median disclosed deal was worth roughly $37.8 million.
A handful of large acquisitions explain part of the 2026 jump. Even so, Frost & Sullivan said the data reflects a wider shift in which defense companies buy technology instead of building it in-house. "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.
American buyers were the largest group, behind about 45% of the transactions studied. Israeli purchasers made up around 30% and European companies about 11%. More than half of all deals fell into three areas: defense electronics and sensors, unmanned aerial vehicles and autonomous systems, and ground systems and robotics.
The report said the wars in Ukraine, the Persian Gulf, Lebanon and Gaza are not the only drivers of the industry's growth. Israeli technologies have also shown their effectiveness and adaptability on the battlefield, which has drawn more interest from international buyers.
Ariel Sagee, a partner at Gornitzky GNY who leads its defense and defense regulation practices, tied the growth to recent conflict and tense geopolitics. He said the war in Ukraine shows the need for stable international alliances to secure supply chains, and that Ukraine faces pressure from Chinese drone components on one side and SpaceX's satellite technology on the other. "Israel cannot be isolated," he said.
Irit Nudelman, vice president and head of defense consulting for Israel and Europe at Frost & Sullivan, expects the pace to hold. "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. She added that the defense sector is becoming more open to start-up technologies. US and Israeli strategic buyers still dominate, she said, while European and Asian firms more often choose partnerships, joint ventures and targeted investments over full acquisitions.
The event also included a discussion between Sagee and retired Maj.-Gen. Amir Eshel, a partner at Aurelius and former commander of the Israel Air Force. Eshel said technology has widened access to capabilities once reserved for nation-states, calling it "the democratization of lethality." He cautioned against weakening Israel's domestic defense innovation ecosystem by moving early-stage companies abroad, and argued for stronger supply-chain partnerships over complete self-sufficiency. "Full Israeli defense production independence is not possible," he said, citing a lack of raw materials and workforce.