AIM-LISTED SDI GROUP EXPANDS INTO AVIONICS WITH PRP OPTOELECTRONICS ACQUISITION
DEFENCE M&A GATHERS PACE AS SDI GROUP ACQUIRES PRP OPTOELECTRONICS
The UK defence and aerospace mergers and acquisitions market continues to gather momentum, as AIM-listed SDI Group plc has acquired PRP Optoelectronics Ltd in a deal underscoring strong demand for specialist engineering capabilities.
The transaction, advised by Crawley-based corporate finance firm Watersheds, marks the second defence-sector deal led by the firm in the current financial year. It reflects what advisers describe as a buoyant M&A environment for UK electronics, aerospace and industrial engineering businesses, particularly those with in-house technical depth and export potential.
STRATEGIC FIT IN ELECTRONICS AND AVIONICS
PRP Optoelectronics designs and manufactures custom optoelectronic components used in demanding aerospace, defence and industrial applications. The business has developed a comprehensive in-house design, development and manufacturing capability — a factor seen as strategically important for buyers seeking to deepen vertical integration and technical resilience.
For SDI Group plc (AIM: SDI), the acquisition supports its ambition to strengthen its electronics and engineering offering while expanding into the avionics market. The deal also provides SDI with access to specialist optoelectronic expertise at a time when defence supply chains are under increasing scrutiny and demand for domestically based capability remains high.
Watersheds worked closely with PRP to construct a succession plan for the business and its team, while identifying a technically aligned buyer capable of preserving the company’s entrepreneurial culture.
Josh Jones, Partner at Watersheds, said: “It’s a privilege to have worked closely with a fantastic business and other advisors to deliver an outstanding result for our clients.
“Our significant track record in both the electronics, and aerospace and defence sectors proved crucial to a smooth and successful process. We are delighted to have secured the right home for the business through our efforts, ultimately ensuring optimal value and obtaining the necessary Cabinet Office approval.”
CABINET OFFICE APPROVAL AND DEFENCE SCRUTINY
Transactions involving defence-related technology increasingly require regulatory clearance, particularly where sensitive applications or export controls are concerned. Securing Cabinet Office approval formed part of the process, highlighting the complexity of executing deals within the UK defence and aerospace ecosystem.
Advisers note that while investor appetite for defence-sector assets remains strong — driven by geopolitical tensions and increased government spending — successful transactions depend heavily on sector knowledge, regulatory awareness and careful buyer selection.
A FOCUS ON LONG-TERM STABILITY
PRP’s shareholders — Kevin Peart, Sam Cox, Andrew McKerrow and Richard Martin — prioritised long-term stability over short-term gain, according to those involved in the deal. A key objective was to find a British-based buyer with complementary technical expertise, capable of maintaining PRP’s established culture and operational independence.
SDI Group, with its electronics background and acquisition-led growth model, was viewed as a suitable strategic partner.
Kevin Peart, Managing Director of PRP, said: “We engaged Watersheds on the basis of the relationship built from the first meeting. We were impressed with the speed at which they found high-quality buyers. Their knowledge of the challenges of the sector and our business, and their dedication to guiding us every step of the way, was instrumental in the success of the process.”
BUOYANT MARKET FOR UK DEFENCE BUSINESSES
Over the past year, UK defence, aerospace and advanced electronics businesses have attracted increasing interest from national and international buyers seeking specialist engineering capabilities. Corporate finance advisers point to sustained activity across lower mid-market transactions, particularly where companies possess proprietary design expertise and secure supply chain credentials.
For Watersheds, the PRP transaction reinforces its position as an adviser in electronics and defence-sector M&A. For SDI Group, it represents a further step in building technical capability within high-specification optoelectronics and avionics.
More broadly, the deal illustrates how specialist UK engineering businesses remain strategically valuable assets in a market shaped by consolidation, regulatory oversight and growing demand for resilient domestic supply chains.
