Investing into Defence Assets

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Defence Bull Market. Copyright: Mike Koerner

By Dr. Mike Körner und Dr. Martin Krause //

More than two years after Russia’s major attack on Ukraine, the super cycle in the defence sector has led to a strong and growing interest of private investors, family offices and private equity in the sector. The valuations of defence assets have now reached new, ambitious heights. For investors with little experience in the defence sector, it is therefore even more important to correctly value the pitfalls and specifics of the industry.

Creating defence-specific growth projections

Traditional corporate planning as the basis for a company valuation is reaching its limits in these times. Traditional market data and analyses such as Jane’s Defence only partially reflect the dynamics of the expected growth. There is a lack of a reliable market projection. Estimating the top-down market potential requires not only a good understanding of the military planning logic, but also specific industry expertise.

Understanding technological change & innovation

The war in Ukraine is an impressive example of the impact that technological innovation can have on the weapon systems used and their military value, for example in the areas of unmanned systems or digitalisation. Such rapid and far-reaching changes have a fundamental impact on military planning and the resulting future requirements and procurements. For an investor, this results in significant opportunities and risks with regards to their defence investment strategy.

Identifying defence-specific risks

In the particular context of the defence industry, there are a number of constraints, specifics, and pitfalls that need to be included in the assessment. Some example keywords here are procurement cycles, complex programmes, technological developments, export control, political stakeholders, and financing problems. All of these industry-specific issues must be realistically factored in when making the assessment.

Incorporating defence-specific expertise

ACTRANS is a management consultancy with a focus on the defence sector and has experience in supporting defence investors in the areas of commercial, technical and programme due diligence. By integrating our network of defence experts, we are able to assist with specific topics in all military domains.