Commercial Buyers Drive Defense Exits
24 September 2025 - A Weekly Publication by New North Ventures
Defense tech M&A patterns have shifted substantially. Commercial companies are now leading acquisition activity - Cisco completed eight defense tech acquisitions, VMware seven, Apple seven. Traditional defense contractors appear less frequently among top buyers.
These commercial acquirers are focusing on specific capabilities: cybersecurity platforms, sensing technologies, enterprise software with government applications. They evaluate targets through enterprise metrics - recurring revenue, scalability, customer acquisition costs - rather than traditional defense contracting frameworks.
The timing differences are notable. Software-led companies targeting commercial buyers achieve median exits in 7.4 years, while hardware-intensive platforms serving defense-specific buyers require 10+ years. Commercial buyers apply familiar and proven due diligence processes and as a result are able to move through acquisitions faster.
This pattern reflects broader government procurement changes. Agencies increasingly purchase commercial solutions adapted for government use rather than commissioning custom defense platforms.
The $1 trillion defense budget emphasizes commercially-relevant technologies - autonomous systems, space networks, missile defense software. This funding direction increasingly aligns with commercial buyer interests and likely sustains acquisition activity.
Companies building enterprise-first solutions with government applications are able to access broader buyer pools. Those optimizing primarily for defense-specific requirements will face a narrower set of potential acquirers.
The trend appears sustainable as commercial buyers view defense tech as proven expansion vectors into government markets they previously couldn’t access effectively.
Why every country needs to master the electric tech stack
Noah Smith’s “Electric Tech Stack” thesis argues that batteries, electric motors, power electronics, and chips now form the foundation of both military capability and manufacturing dominance. His evidence centers on drone warfare in Ukraine, where these electric platforms account for 60-70% of battlefield losses according to IFRI reporting.
Smith’s key insight is supply chain convergence. The components that make drones effective—lithium-ion batteries, permanent-magnet motors, power electronics, trailing-edge chips—are the same components needed for electric vehicles, industrial robots, and consumer electronics. China controls most of these supply chains despite the underlying technologies being invented elsewhere.
The manufacturing implications matter beyond military applications. Traditional industries required separate supply chains—making cars differed from making aircraft or electronics. Electric platforms share core components, allowing companies like Xiaomi to transition from smartphones to electric vehicles rapidly. BYD demonstrates this: starting as a battery maker, they now manufacture across electric vehicles, cargo ships, trains, and industrial equipment.
Smith argues Western countries have been slow to recognize this convergence because they frame electric technology as a climate issue rather than industrial and defense capability. Meanwhile, China has built integrated supply chains across the Electric Tech Stack components.
The thesis suggests that controlling these four component categories—batteries, motors, power electronics, chips—provides manufacturing advantage across multiple industries simultaneously, including military platforms that increasingly rely on electric power and digital control systems.
More links to explore:
HavocAI delivered an impressive victory at the Army’s xTech Pacific competition, outperforming four direct competitors in the challenging “advanced defensive and deterrent capabilities for Army and commercial watercraft” category. The team demonstrated sophisticated collaborative convoy protection using six vessels across two platform types, successfully showcasing autonomous escort operations for the Army’s new Maneuver Support Vessel.
Founded just over a year ago, HavocAI has maintained laser focus on warfighter requirements rather than attempting to adapt commercial technologies for military use. This specialized approach has enabled the company to understand operational constraints and design solutions that military evaluators could immediately envision in real deployment scenarios.
The competition win establishes HavocAI as a leader in maritime collaborative autonomy and demonstrates the technical maturity of their multi-vessel coordination capabilities. The company’s rapid progression from startup to competition winner reflects the advantages of building directly for end-user needs from day one.
In this episode of Securing Our Future, host Jeremy Hitchock, explores the intersections of commercial innovation and national security. Join us as we engage in a thought-provoking discussion with Alex Lisle, CTO of Reality Defender. Alex shares insights from his 24-year career in cybersecurity, including his transition from a youthful hacker to a leading figure in the industry. We delve into the challenges posed by AI-generated deceptions, the role of cybersecurity, and the evolving landscape of synthetic content detection. This episode also touches on the regulatory and policy implications of AI advancements and the importance of maintaining digital authenticity in a rapidly changing world. Don't miss this in-depth conversation on the future of AI and cybersecurity.
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