Arms makers are sizing up niche acquisitions in cyber security and commercial aerospace in the hunt for growth as uncertainty over military spending in the West has put larger-scale defence sector deals on hold - at least for now.

Feeling the strain from shrinking defence budgets in the United States and Europe, weapons makers from Britain’s BAE Systems to U.S. group Raytheon are eyeing companies with innovative technology or a strong position in a specialist market, ex ec utives at the Farnborough Airshow said.

“Cyber and IRS (intelligence, surveillance and reconnaissance) are the only real growth areas in the defence sector at the moment and the big players are looking to move into those spaces more and more,” said David Baxt, the global head of aerospace and defence investment banking at Jefferies.

Companies with a large exposure to defence markets have already started acquiring smaller groups that can take them into a more commercial space.

British aero and defence group Cobham’s recent 275-million-pound ($426 million) acquisition of Danish satellite and radio equipment maker Thrane & Thrane took it into the communications market, while BAE’s acquisition of Norkom earlier this year moved it into financial services and fraud protection.

William Swanson, chief executive of U.S. arms maker Raytheon, said his company had not slowed its acquisition plans due to the uncertainty surrounding the U.S. defence budget, but that it was focusing on buying up smaller specialist firms.

“We’re buying four or five companies a year. They’re small, but they’re niche for us and it hasn’t slowed our activity,” Swanson told Reuters at the air show.

“Cyber has been a good one for us and our business has been growing, and it’s really growing because of cyber.”

Raytheon acquired three cyber companies in 2011.