The urgent need to rearm Europe and France implies a major financing requirement for defense contractors.
At a time when the sovereignty of France and Europe needs to be revitalized, every link in the value chain has its part to play if we are to keep up the pace demanded by the geopolitical situation. Since 2022, there has been an increasing number of announcements concerning the ramp-up of major prime contractors. supply chain are struggling to keep up, notably due to a lack of resources to invest in production capacity.
On March 4 and 5, 2025, the European Commission, through its President Ursula Von Der Leyen, announced a massive plan entitled " ReArm Europe "800 billion investment component and strategic priorities designed to boost financing for defense companies at both national and European level.
Among these, defense projects (related to munitions or military infrastructure) should eventually be eligible for loans from the European Investment Bank, which until now has excluded these areas. The plan also aims to redirect private savings towards defense companies.
These proposals, which have yet to be detailed and validated, respond to some of the challenges facing DTIB companies. Beyond that, it is highly likely that other funds, notably private, will be needed to complete these advances.
What role can private equity funds play in the development of the companies that make up the Defense Industrial and Technological Base (DITB)?
For several years now, private equity funds have been participating in the traditional public financing of defense. Nevertheless, this logic is applied by a limited number of funds, often specialized and accustomed to the specific logics of defense. Despite positive signals on demand and budgets, the sector suffers from structural impediments from the funds' point of view: non-compliance with ESG criteria, lengthy cycles and exit difficulties.
This note takes stock of the needs of the DTIB, puts into perspective the investment funds that are gradually taking an interest in defense, and makes concrete proposals to encourage, stimulate and promote private investment in the defense sector.
A note from Kairn Strategy Consulting and Industries by Eurogroup Company.
