Key facts
- Private investors are urged to increase funding for European defence companies to address a gap left by public spending.
- Senior finance executives at the Farnborough Airshow highlighted bottlenecks and barriers discouraging investment.
- The number of finance delegates at the airshow has tripled compared to previous years.
- Investor sentiment has cooled, leading to weaker defence firm stock prices and a postponed IPO by KNDS.
- Banks have increased their focus on defence funding deals.
- Valuations for defence firms have normalized, making them more investible, according to a private equity executive.
Senior finance executives speaking at the Farnborough Airshow have called for private investors to significantly increase their capital allocation to European defence companies, arguing that public spending alone is insufficient to meet growing defence needs amid heightened geopolitical tensions.
Cathal Deasy, global co-head of investment banking at Barclays, emphasized the need to mobilize private capital at scale, urging national governments to provide greater clarity and act more swiftly. Bankers and investors are attending the airshow in record numbers, attracted by the potential returns from a global boom in defence investment.
However, recent investor sentiment has cooled, reflected in a modest 1.3% gain for an index of European aerospace and defence stocks year-to-date, compared to an 8% rise in the broader STOXX 600. This cooling sentiment led Franco-German defence group KNDS to postpone its stock market listing. Amin Mansour, vice chairman at ING, noted that the bank has expanded its team dedicated to defence funding deals to approximately 50 bankers, a substantial increase from five years ago.
Executives also pointed to challenges in channeling funds to smaller defence contractors due to complex procurement processes, creating bottlenecks in the supply chain. Despite these hurdles, a private equity executive indicated that defence firm valuations have normalized over the past year, making them more attractive for investment.