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Jenny Speck to Speak at Lockton U.S. Energy Risk Summit
Partner Jenny Speck will speak at Lockton’s U.S. Energy Risk Summit on November 12, 2026, in Houston, Texas. The summit …
November 12, 2026
November 12, 2026 • 1-minute read
Vinson & Elkins Partners Sebastian Tiller and Ben Heriaud sit down for a conversation on the firm’s Aerospace and Defense practice, the dealmaking environment, and the evolving role of the federal government.
The aerospace and defense industry has outgrown its conventional definition. What does the industry look like today, and how does your practice serve it?
Sebastian: Aerospace and defense today is an industry of expanding scope. While traditional A&D products and systems remain a major part of the business, the industry is rapidly integrating emerging and sophisticated technologies, including artificial intelligence, to create new and powerful solutions for both government and commercial applications. To support the technological integration, the industry is also crossing over into adjacent sectors like mining and digital infrastructure.
That breadth is drawing in a wide range of innovators and investors. Our practice serves clients across the full spectrum of industry participants, from early-stage startups to established industry leaders, and involves all capital solutions, including private equity and venture capital investors, direct lending sources, and traditional institutional lenders.
Ben: A&D continues to be a capital-intensive industry. As our clients work through the changing landscape, we are partnering with them to structure transactions that serve their strategic direction and growth, covering everything from M&A and joint ventures to equity and debt raises. We have also seen the federal government become increasingly interested in stepping in as a source of capital.
The practice integrates expertise across all relevant practice groups, including finance, government contracts, regulatory, and intellectual property. This multidisciplinary approach helps provide clients with seamless service and tailored legal solutions.
The industry’s expanding scope underscores its exponential growth. What are the important factors driving that growth?
Sebastian: There are several factors at play, all of which are now converging to boost activity in the sector. One of the more important factors is the current geopolitical environment. As international tensions have intensified in recent years, governments have made it a priority to expand, strengthen, and modernize their A&D capabilities, pushing demand for A&D products and systems to new heights.
Ben: These geopolitical dynamics are also spurring extraordinary technological innovation, including from smaller, emerging companies. These new entrants are often backed by the same investors who fund software and other technology businesses — and have altered the competitive landscape across the A&D market.
Sebastian: Of course, another change agent has been the rise of artificial intelligence, which A&D companies are increasingly building into existing systems and new platforms. Meanwhile, many technologies that once served mostly government customers are finding new commercial applications.
Ben: Given all of these factors, A&D is drawing outsized investment versus many other industries, with capital flowing in through every available channel: project financing for greenfield and brownfield developments; direct equity investments from venture capital, private equity, and strategic investors funding early-stage companies; and IPOs and other public equity capital markets transactions, just to name a few.
One challenge facing the A&D industry seems to be supply-chain pressure.
Ben: Correct. A&D depends on complex supply chains, which have come under significant pressure as demand for supply and output in the industry has increased to levels that existing supply chains were not built to support.
In light of the geopolitical environment, governments and industry participants are now moving to secure access to existing and new supply chains for critical products and elements, and to prevent them from being absorbed by perceived geopolitical adversaries. The demand and geopolitical environment have combined to spur a rebuilding of the industrial base to expand and strengthen those supply chains.
Sebastian: The supply-chain pressure is one factor driving M&A activity in the industry. Some industry participants seek to bring their key suppliers in-house instead of having to depend on outside vendors, increasing vertical integration. Another catalyst for more M&A transactions is the necessity to achieve scale. To win large government contracts or participate in commercial programs, companies need to demonstrate that they can deliver volume, which often motivates business combinations to propel companies’ capacities to do so.
Dealmaking in A&D can be more complex than in other industries. What are some key considerations for companies in the sector pursuing M&A?
Sebastian: For one thing, due diligence in A&D-related transactions tends to be more rigorous in certain areas and sometimes extends to other layers in a company’s business operations. Due diligence in A&D typically focuses on, among other areas, the target’s supply chain, compliance with national security regimes, cybersecurity regulations, government contracts rules, and trade and export controls.
Ben: Intellectual property is another area of focus as the industry absorbs and integrates new technologies. Protecting intellectual property rights and securing the integrity of potentially sensitive data is critical. In capital markets transactions, you see these due diligence points shaping disclosure. As A&D products and services become more sophisticated and complex, we work with clients to identify the specific risks and opportunities to convey a complete picture.
What about foreign ownership?
Ben: That’s another important consideration. New rules restricting corporate ownership by Foreign Entities of Concern — codified in the One Big Beautiful Bill Act last year — imposed constraints that the market is still working through. So, in managing their capital stack, A&D companies must stay particularly vigilant in managing foreign ownership that could put their government business relationships in jeopardy.
Are there other key regulatory considerations for A&D transactions?
Sebastian: As it relates to vertical integration, companies that are looking to achieve supply chain integration need to prepare for scrutiny by antitrust regulators, particularly if the relevant supplier has historically also served competitors and other industry peers. Regulators and government customers are focused on potential “lock-out” scenarios. This topic is not applicable only to the A&D industry, but it has become a more prominent consideration as A&D companies look to integrate supply chains into their business operations.
You mentioned the federal government’s role, which now includes providing capital to industry participants. What are you seeing there?
Sebastian: I think it’s fair to say that the government’s strategy has been evolving. As the government is seeking to rebuild, strengthen, and expand the industrial base and supporting infrastructure and energy projects, it keeps refining its approach.
Different departments and agencies pursue different objectives. The Department of Commerce, the Department of Energy, and the Department of War each have their own mandate and pursue different yet complementary strategies. In the A&D sector, the Department of War has been particularly active and become very methodical in its approach.
Ben: Agreed. For example, we understand that the Economic Defense Unit at the Department of War has developed a strategy that focuses on three key considerations: does the company’s business help solve a perceived strategic vulnerability in the defense industrial base, does the company have a governance structure that protects national security interests, and would public investment in the company help attract additional private capital.
Sebastian: The Economic Defense Unit has become very focused on identifying the Department of War’s needs, and working with the industry participants that are best positioned to address those needs. Another consideration is, of course, to prevent mission-critical services, technologies, and supply chains from falling into the hands of geopolitical adversaries. The transactions and terms upon which the Department of War is prepared to provide capital or other support reflect precisely that strategy, which provides support to businesses that need it to address the government’s needs and whose operations serve the national interest.
Ben: The government’s investments have been bespoke and wide-ranging. We’ve seen everything from project-level and corporate debt to equity and equity-linked products and other hybrid structures. We believe that the bespoke structures reflect the government’s evolving strategy and a goal of providing capital solutions that meet specific needs.
No one can say exactly where the A&D industry is headed next. But in the coming years, some in the industry will thrive while others won’t. What will make the difference?
Sebastian: One differentiator will be scale. For companies whose business models center on participating in large government programs, building the capacity to meet these programs’ high production demands will be crucial.
Ben: Another key differentiator involves the adoption of new technologies. Breakthrough technologies are always exciting. But their long-term viability depends more on what customers will support, and less on what is possible to build.
A&D companies that think practically about technological development — that weigh all the costs and benefits and design around real-world use cases — will have an edge in attracting customers, investors, and acquirers. By contrast, companies whose core products are prohibitively expensive to develop, or whose applications cannot realistically work in real-life scenarios, are at greater risk of falling behind.
Sebastian: Succeeding on these fronts is far from easy, and doing so involves numerous legal and regulatory questions. Navigating these questions effectively requires counsel with knowledge, skill, judgment, and experience who can identify obstacles early and structure deals around them.
Ben: Because the A&D industry is changing so quickly, and the government’s role is changing alongside it, anticipating the long-term implications of any single transaction is critical. How well market participants manage risk and opportunity now will determine the options they have in the years ahead, including what future opportunities they can pursue and on what terms. Our aim is always to provide forward-thinking advice to help our clients pursue their goals.
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.
