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City Prioritizes Innovative Commercial Aerospace Firms

City Prioritizes Innovative Commercial Aerospace Firms
Diverging Valuations in Aerospace Sectors
Bruce Andrews and Joseph Lakaj of Alderman and Company have identified a widening valuation gap between defense and commercial aerospace firms, a trend that is significantly influencing deal-making strategies in 2025. Defense-oriented companies are commanding premium multiples, with valuations reaching as high as 14.7 times EBITDA for firms generating $5 to $15 million in earnings. In contrast, commercial aerospace companies are trading at comparatively lower multiples, peaking at around 11 times EBITDA within the same earnings bracket.
This disparity in valuations stems from fundamental differences in market stability and risk profiles. Defense firms benefit from long-term government contracts and consistent demand, underpinned by the U.S. Department of Defense’s substantial budget allocations—$849.8 billion for 2025 and a proposed increase to $961.6 billion for 2026. Escalating global tensions in regions such as Ukraine, the Middle East, and Asia are further driving demand for advanced defense technologies, including intelligence, surveillance, and reconnaissance (ISR) systems, cyber capabilities, and unmanned platforms. Private equity has become increasingly active in this space, accounting for 24 percent of aerospace and defense transactions in the first quarter of 2025. Investors are particularly focused on companies with proprietary technologies and stable revenue streams. Noteworthy deals include Apollo Global Management’s acquisition of Barnes Group at 15 times EBITDA and Crane Co’s purchase of Baker Hughes’ Precision Sensors & Instrumentation Business at an impressive 19.2 times EBITDA.
Commercial Aerospace: Challenges and Opportunities
Although commercial aerospace firms generally command lower valuations, the sector is experiencing a notable resurgence. This revival is driven by the recovery of international air travel, increased original equipment manufacturer (OEM) production, and a surge in space launch activities. Companies at the forefront of innovation—particularly those developing advanced materials and next-generation avionics—are attracting investor interest. For example, Redwire Corp’s acquisition of Edge Autonomy was completed at 12.8 times EBITDA. Nevertheless, the majority of commercial aerospace transactions remain closer to 8 times EBITDA, as illustrated by Standex International’s purchase of McStarlite at 8.5 times EBITDA and Stonepeak’s acquisition of Air Transport Services Group at 6.6 times EBITDA.
In Hong Kong, innovative commercial aerospace firms face distinct challenges. Securing adequate funding and navigating complex regulatory environments present significant obstacles, especially as global aerospace giants such as Boeing and European competitors like Isar Aerospace intensify competition. These international players are leveraging local scientific research and forging strategic partnerships to accelerate technological advancements, thereby raising the competitive bar for domestic companies.
Despite these hurdles, firms with proprietary technologies and robust research and development capabilities are well-positioned to seize emerging growth opportunities. The sector’s foundation is bolstered by rising demand for advanced aerospace solutions and the city’s commitment to fostering innovation. However, persistent challenges—including supply chain disruptions, labor shortages, tariffs, inflation, and rising interest rates—continue to test the resilience of the industry.
While defense remains the dominant sector in terms of valuation and market stability, commercial aerospace companies, particularly those leading in innovation, are steadily carving out their own trajectory. For investors and industry leaders, a nuanced understanding of these evolving dynamics is essential to unlocking value and successfully navigating the complex aerospace landscape.

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