The defense sector is under water: Maritime investments reflect growing threats

On July 6, three maritime announcements hit almost simultaneously. Lockheed Martin announced it would spend $3.5 billion to buy undersea specialist Ultra Maritime. French company Thales announced the purchase of a 36 percent stake in the French undersea warfare and defense tech company Exail Technologies, with long term plans to purchase the firm entirely at an implied $4.5 billion enterprise valuation. And Italy’s Fincantieri announced a nearly $700 million investment in four maritime drone and undersea engineering firms.

It was not just an impressive display of fiscal might by three legacy defense businesses to invest in established and revenue-generating specialist firms, at a time when start-ups command most of the limelight. That the three firms reached similar conclusions, on similar timelines, reflects both increased adversary challenges in this operating domain and the reality that undersea systems are poised to capture more market share. 

Policy makers, military professionals and subject matter experts have long emphasized concerns about undersea challenges, but the last five years have seen a greater imperative across the spectrum of threats facing NATO nations and US allies in Asia-Pacific. And these changes are driving market opportunities across the globe. 

China has used surface and subsea sensors to map the bottom of the ocean in preparation for a conflict in the Indo Pacific. This large-scale project, including at least 42 research vessels over five years, has implications for fishing and mineral prospecting, but its prime role is in support of undersea warfare. US Vice Adm. Richard Seif, himself a submariner, has described China’s efforts as developing an “underwater Great Wall” of sensors, uncrewed systems and data fusion capabilities designed to detect and track undersea assets. 

Another adversary, Russia, has run operations targeting undersea cables carrying internet traffic and Western undersea pipelines. Russia has done so using its GUGI submarine fleet and uncrewed undersea capabilities to reach cables and pipelines at depths that only the United States can match. 

And undersea mines remain a key asymmetrical capability for smaller nations. Look no further than the Strait of Hormuz: deployment of mines and mine countermeasures have changed the calculus of international trade as much as they have of warfare. A core tool in hybrid warfare, mines can shift the balance of power and provide leverage to foes weak and strong alike. Virtually no US or allied mine counter-measure capabilities were on hand to address the Iranian mine-laying operation; the scale of deployed mines in the Strait remains unknown, or at least not public knowledge, to this day. 

For China and Russia, the US and its allies must not only replicate these capabilities but must also survey and monitor potential adversarial activities. And the Gulf countries are sure to take notice of what Iran has done and invest to counter those actions. Unmanned maritime capabilities, including subsea and surface drones, could play a leading role in those missions. 

Industry Responds

So, what are the through lines of the July 6 M&A spree? First, there is a clear desire to accelerate competencies in this area.

Thales’ investment target, Exail Technologies, had just reported revenue growth of 40 percent in Q1 2026. This mid-size specialist, with roughly 1,600 employees and a strong international presence, had already been courted by other investors, including France’s Safran. Exail develops maritime, aerospace and defense systems along with photonics, but is best known for its subsea solutions and mine countermeasures, which were likely most attractive to Thales.

Ultra Maritime, acquired by Lockheed Martin, has a long heritage but experienced a series of transformations in the past decade. Initially a component of publicly-traded Ultra Electronics, Ultra Maritime was then in private equity player Advent International’s portfolio and was subsequently sold in a carve-off of several Ultra divisions to strategic buyers. The firm boasts a presence in the Five Eyes countries and has 2,000 employees. Its undersea weapons and sensor portfolio, including torpedo and sonar technologies, radar, electronic warfare and sonobuoys, will significantly expand Lockheed Martin’s undersea capabilities, known for sub-hunting, submarine combat systems and a growing offering of unmanned undersea systems. 

A sign of how Lockheed views this sector: this is the company’s first financially significant acquisition since it acquired rotorcraft maker Sikorsky in 2015, a move that fundamentally reshaped the company’s portfolio. 

Fincantieri is purchasing four firms that deliver unmanned maritime and undersea capabilities: Next Geosolutions, WSense, Graal Tech and Defcomm. Fincantieri had previously purchased maritime engineering company Remazel and torpedo producer WASS, formerly part of Leonardo. Next Geosolutions has a fleet of dynamic positioning vessels providing maritime studies and mapping services. WSense provides subsea wireless and mesh wireless monitoring systems that can track subsea targets and monitor pipelines and cables. Graal Tech builds autonomous underwater vehicles (AUVs) and robotic technologies, while Defcomm provides satellite communication services used by autonomous vessels.

In 2024, Fincantieri CEO Pierroberto Folgiero told Breaking Defense that “We are very serious about growing underwater capabilities” and compared the potential market to the space sector. Fincantieri’s moves certainly seem in line with that belief, as they signal a broadening of their manufacturing, technology and services capabilities across the defense and commercial maritime sectors. 

But there is a second notable trend from the July 6 action: integrators buying established small or mid-tier specialist maritime tech firms.

While the naval sector has not been as acquisitive as other market segments, these investments join a short list of financial plays that focus on established capabilities and market positions. They echo Bollinger’s 2022 acquisition of VT Halter Marine as a capacity and market share play, Leidos’ 2021 acquisition of venerable Gibbs & Cox as a capability expansion move, and the 2020 HII acquisition of the REMUS autonomous underwater vehicle product line from Norway’s Kongsberg. As the sector welcomes new entrants largely focused on uncrewed systems, it will be interesting to see if these specialist providers become more attractive to primes as they establish market share and solidify their manufacturing capabilities.

The conflict over free passage in the Strait of Hormuz has highlighted the importance of mine and counter-mine warfare, while Ukraine’s performance against Russia’s Black Sea fleet has underscored the impressive capabilities of unmanned naval systems. Finally, Russia and China’s submarine fleets and increasingly assertive subsea posture points to a need for improved US and allied subsea warfare capabilities. 

The July 6 spree from Lockheed Martin, Thales and Fincantieri is a welcome pivot to a critical undersea warfighting domain that has grown in prominence. 

Aleksandar (Alek) Jovovic is deputy director at the Center for the Industrial Base and a senior fellow in the Defense and Security Department at the Center for Strategic and International Studies (CSIS). Katy Buda is associate director at the Center for the Industrial Base at the Center for Strategic and International Studies (CSIS).