22 of recent M&A transactions reveals how battlefield dynamics are reshaping the sector. A growing number of investors are targeting technology startups rather than industrial companies, reflecting that 21st century warfare is fought as much with drones and artificial intelligence as it is with warplanes and tanks. Here, Europe’s technology deficit in comparison to China and the U.S. is likely to require collaboration with foreign innovators. It is in that space that we certainly see Israeli DefenseTech playing a role.” Kela Technologies emerged as one of Israel’s fastest-growing defense-tech startups, raising USD 100 million and recently making its first acquisition: Pelanor, adding a cloud-management and monitoring platform to strengthen Kela’s broader defense-software ecosystem. The company’s modular “battlefield operating system” aims to help Western militaries integrate AI, sensors and commercial tech into existing platforms, leveraging the Israeli founder team’s experience. Commcrete secured USD 29 million in combined seed and Series A rounds to build handheld tactical SATCOM devices that convert ordinary radios into satellite-connected systems used by soldiers, special forces and first-responders. The subsectors shaping the next wave of defense innovation are already coming into focus. “AI is viewed as critical for future military operations, enabling autonomous systems, predictive analytics, and decision-support tools,” highlights Lee at A&O Shearman. He continues: “As always for Israel, rising cyber threats to critical infrastructure and military networks make cyber-defense a top priority. Autonomous Systems – these systems include, among others, unmanned aerial systems (drones) and ground robots. These systems reduce risk to personnel and enable persistent ISR (intelligence, surveillance, reconnaissance).” Anna from Pearl Cohen agrees, pointing out how “unmanned aircraft systems and counter-UAS technologies continue to advance rapidly, from drones and interceptors to human-guided autonomous platforms. Multi-layered air and missile-defense systems, such as Iron Dome, SkyHunter and Trophy APS, remain central pillars of modern defense architecture.” She also points to sophisticated sensor suites designed to protect borders, critical infrastructure and homeland security targets, alongside the software ecosystems that ensure quality, reliability and maintenance across these systems. Beyond the dominance of AI, Anna notes that a number of emerging defense technologies are quietly accelerating. Directed-energy capabilities – including lasers and high-power microwave systems – are gaining traction for “softkill” missions such as blinding sensors or disrupting electronics on incoming missiles and drones. Electronic warfare is also becoming more refined, with advanced RF sensing, passive radars, and low-probability-of-intercept
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