Amid rising interest in defense, IPOs are an increasingly viable exit route for investors

IPOs are an increasingly viable exit route for equity investors with defense-related businesses in their portfolios. The universe of potential trade buyers for defense assets is likely to be limited in a world where governments have a significant say in any change of ownership, and therefore flotations are a good option for sponsors seeking a liquidity event.

Defense IPOs present distinctive legal and diligence challenges that set them apart from conventional listings. Government contracts are central to defense companies’ business models but are not standard commercial agreements; while they are often long-term, defense procurement requirements give government buyers significant negotiating power as well as the right to alter commercial terms. Potential investors will therefore want to carefully diligence these agreements in order to take a view on the quality and security of the company’s order book.

Challenges of handling classified information add complexity to listings

The challenges of handling classified information add a further degree of complexity. As we explain in more detail here it may not be possible for certain agreements to be fully disclosed in the run-up to a listing. Export controls bring additional challenges as the required permissions can be withdrawn at short notice, meaning contractual certainty is never absolute. Defense companies pursuing IPOs therefore need to develop frameworks for managing these risks.

Compliance is another key focus area. Founder-led and fast-growing companies in the defense supply chain (i.e., the sort of businesses that private equity and growth capital investors are increasingly targeting) often do not have the mature compliance processes of defense primes. Any gaps in anti-bribery and sanctions controls should be addressed by investors at the point of commitment in preparation for an eventual exit.

PR risk is equally significant and demanding of early attention. Ensuring that a company's end-users are in countries that investors and the public would be comfortable with is an important consideration in advance of a listing. A clean compliance record and a defensible customer base are not things that can be built retroactively.

ESG challenges need to be carefully handled during book-build

Defense IPOs also face a structurally narrower investor universe than most sectors, with many ESG-mandated funds, sovereign wealth funds and values-based investors excluding or restricting defense holdings. A traditional book-build that reveals uneven demand from certain investor categories during the price discovery process could create negative signaling effects.

However, a fixed-price offering avoids this dynamic: demand is assessed privately through the pre-placement, and the public offering proceeds at this price without the transparency (and potential for negative headlines) of an open book.

Geopolitical instability and the desire among governments to build “strategic autonomy” will ensure that government budgets will continue to flow into the sector for the foreseeable future. But private capital sponsors must pay close attention to governments and their advisers to ensure their portfolio investments remain aligned with political priorities and can continue to access public funds. The companies that succeed in public markets will be those that understand the political landscape from the outset and position themselves accordingly.

Case study: the Czechoslovak Group IPO

Our global team recently advised the underwriters on the EUR3.8 billion IPO of Czechoslovak Group (CSG) on Euronext Amsterdam. The transaction was, according to Euronext, the largest defense IPO in history both in terms of the amount raised and market capitalization, the biggest European IPO since 2022 and the most significant listing on Euronext Amsterdam in more than a decade. The market cap of CSG upon IPO was EUR25bn.

CSG is a key supplier to Ukraine, which accounted for around a quarter of CSG’s sales in the first nine months of 2025. The IPO proceeds will contribute to the company’s international expansion, including via further acquisitions following CSG’s purchase of U.S. ammunition maker Kinetic from Remington in 2024.

CSG’s equity story was based around three core pillars: macro tailwinds from increased defense spending globally; the company’s EUR14bn order backlog; and a secure supply chain for critical components. NATO countries' public commitment to rebuild their ammunition stockpiles was an important factor, with CSG's products (primarily ammunition) not vulnerable to rapid technological obsolescence.

Investor expectations of forward-looking guidance for defense companies led to CSG preparing a profit forecast, which may set a precedent for future defense listings. A pre-placement with key anchor investors, an accelerated timetable (to mitigate exposure to headline risk), a fixed price rather than a traditional book-build, and conservative pricing of the stock led to the IPO being oversubscribed by a factor of ten. In response, CSG’s share price rose 31% on debut to value the business at around EUR33bn.

A conservative fixed price serves important strategic purposes for defense companies. First, it generates strong aftermarket performance, which builds long-term investor confidence in a sector that may be unfamiliar to many institutional investors. Second, oversubscription at a fixed price allows the issuer to allocate shares selectively, prioritizing long-term holders, strategically aligned investors, and those comfortable with the defense sector's unique risks, including its PR and ESG dimensions.

Amsterdam served CSG as a neutral, EU-based listing venue that reinforced the company's positioning as an international business. The choice of venue, the abbreviation of the company name from Czechoslovak Group to CSG, and the emphasis on global sales were all part of a deliberate strategy to broaden the investor base. CSG’s successful listing demonstrates investor appetite for defense-related assets but also underscores the importance of robust preparation.