European defence groups look to flotations as they chase market rally
Stoxx Europe aerospace and defence index has more than tripled since 2022, with more than half of that rise coming this year
Several big European defence companies are preparing to float on public markets as the industry seeks to capitalise on the investor enthusiasm that has sparked a blistering rally for the sector this year.
British metal engineer Doncasters Group, Franco-German tank maker KNDS and Czech defence company Czechoslovak Group (CSG) are among those exploring initial public offerings, according to people familiar with their plans.
The potential listings come after investors have piled into European defence-related IPOs since 2024. Shares in French night-vision goggles maker Exosens, German tank gearbox maker Renk and Poland’s Arlen all jumped on their trading debuts.
“Every investor nearly without exception is dedicating a lot of time” to the defence sector, said Andreas Bernstorff, global head of equity capital markets at BNP Paribas. “There is a great deal of focus on the new companies that are coming to market.”
European defence stocks have soared this year as the continent has committed to boosting defence spending in response to the Trump administration’s demands that the region shoulder more of its own security costs. In June, Nato’s 32 members pledged to increase defence spending to 5 per cent of GDP — a significant jump from the previous 2 per cent target.
The Stoxx Europe aerospace and defence index has more than tripled since Russia’s full-scale invasion of Ukraine in 2022, with more than half of that increase coming in 2025. The index has outperformed the S&P 500 and the Nasdaq Composite since the start of the year.
While Doncasters is looking to Wall Street for its IPO and has tapped bankers at Moelis to work on the deal, many are hoping to list closer to home. CSG is aiming for a primary listing in Amsterdam and targeting a valuation of about €30bn, which would make it one of the continent’s most valuable defence companies.
KNDS, which recently appointed former Airbus chief executive Tom Enders as its chair, has hired Lazard to advise on a potential listing. Finnish satellite maker Iceye is at present weighing raising new funding and could eventually pursue an IPO.
Doncasters did not respond to requests for comment; Moelis, Iceye and CSG all declined to comment. KNDS said it was undertaking an “IPO readiness” project but no final decision had been made.
“Investors aligning with where government spending is going is a good theme,” said Gareth McCartney, global head of capital markets origination at UBS. “One key trigger and catalyst in Europe is a redefinition of defence spending.”
As investors have piled in, valuations are running at near-record highs, boosting the case for listing. The European defence index is even outstripping Wall Street’s blue-chip tech index in valuation terms, with the price-to-earnings ratio of the former sitting at about 34 times.
The rush to consider public listings was “essentially opportunistic”, said Nick Cunningham, analyst at Agency Partners. Given some of the “enormous increases in stock prices” of listed players, defence was a sector that is “very tempting to access”.
Defence companies considering a float have reason for optimism. Submarine manufacturing business TKMS, a spin-off of German conglomerate Thyssenkrupp, saw a 35 per cent share price bounce when it debuted in Frankfurt in October. Despite falling back slightly, the stock is still trading 20 per cent higher than its initial price.
Meanwhile, shares in Renk, which listed in February 2024, are up 235 per cent year to date. Those of Exosens, which came to market in July 2024, are up more than 130 per cent in the same period.
Investors are also increasingly betting that some of Europe’s defence tech start-ups will come to market in the not too distant future as backers look to exit. Europe now boasts a few defence start-ups with a “unicorn” valuation of more than €1bn, including drone makers Helsing, Quantum Systems and Tekever.
“I expect we’re going to see a winnowing down and a few companies emerge and build large and enduring businesses,” said Alex Ferrara, a partner at the venture capital firm Bessemer, which is backing companies in the sector.
However, Nicholas Nelson, general partner at Archangel, an early-stage venture fund focused on defence tech, said many of the European tech champions will not come to market.
It was more likely, said Nelson, that “a very small number will list and the rest will be acquired by US or European strategics or PE-backed companies”.