Democratic lawmakers introduce bill to review private equity defense investments

Democratic lawmakers introduced legislation yesterday that would require the Department of Defense to review private equity transactions giving firms at least a 25 percent stake in defense companies. The bill, called the Critical Defense Ownership Review Act, would also direct the Pentagon to evaluate the financial stability of private equity firms before and after acquisitions and conduct triennial reviews of PE-acquired weapons contractors.

Private equity activity in defense Private equity firms have acquired more than 1,500 defense companies over the last two decades. They invested a record $17.7 billion in the sector from January to mid-October 2025. The firms typically fund acquisitions with 60 to 90 percent debt and 10 to 40 percent equity.

A 2024 study found PE-backed weapons contractors are 4 to 9 percent more likely to file for bankruptcy than those without such funding.

Oversight concerns The legislation aims to give the Pentagon greater visibility into ownership changes at contractors critical to national security. A non-resident fellow at the Quincy Institute said PE-backed firms lack transparency and may push U.S. foreign policy in directions that do not serve the public interest.

The Department of Defense established an Economic Defense Unit earlier this year to service private equity firms and arrange loans for deals considered critical to national security.