Overview: Industrials & Manufacturing in the M&A Landscape

Industrials and manufacturing companies form the backbone of the economy, encompassing sectors from aerospace and automotive to construction and heavy equipment. This broad category has long been a cornerstone of mergers and acquisitions (M&A) activity. In fact, by some measures the industrial sector accounts for more M&A deals than any other – one global analysis found that industrial and manufacturing businesses have collectively engaged in over 125,000 transactions since the 1980s, the highest deal count of all industries. By value, industrials may not always dominate headlines like technology or healthcare mega-deals, but they consistently represent a significant share of global dealmaking. Particularly in the United States, manufacturing and industrial firms frequently turn to M&A as a strategic tool for growth, consolidation, and adaptation in a changing market.

Recent years have underscored the strategic importance of M&A for industrial players. After a tumultuous period during the COVID-19 pandemic and its aftermath, deal activity in the industrials sector is again on the upswing in 2024–2025. Industrial and manufacturing companies are pursuing acquisitions and divestitures to reposition themselves for long-term success. The sector’s deal drivers reflect its unique challenges and opportunities: securing supply chains, adopting advanced technologies like automation and AI, focusing on core competencies, and responding to economic shifts. While technology companies still lead in overall M&A spending (see Legacy Advisors’ Technology M&A Report (2025)), the industrials & manufacturing arena has re-emerged as one of the most active and dynamic M&A markets. In 2024, industrials deals rebounded alongside sectors like financial services and consumer products, and 2025 is poised to continue this momentum (for context on other sectors’ rebounds, see our 2025 Financial Services M&A Industry Report and 2025 Consumer Products & Retail M&A Industry Report).

In the sections below, we provide a comprehensive analysis of M&A activity in Industrials & Manufacturing, examining historical patterns, recent trends through late 2025, key drivers, and subsector dynamics across aerospace & defense, automotive, engineering & construction, and industrial equipment manufacturing. We also discuss regional factors influencing deals, highlight notable recent transactions, and assess the regulatory environment shaping industrial M&A. Finally, the report offers an outlook on what industrial business owners and acquirers can expect heading into 2026. The goal is to equip industry executives, investors, and founders with a deep understanding of the M&A landscape in Industrials & Manufacturing – a landscape defined by both enduring forces (like the pursuit of scale and efficiency) and evolving trends (like digital transformation and supply chain realignment).

Historical Significance and Major Deals in Industrials M&A

The industrials & manufacturing sector has a rich history in M&A, marked by waves of consolidation and transformative mega-deals that have reshaped entire industries. Over the decades, industrial conglomerates and manufacturers have frequently merged or acquired peers to achieve economies of scale, broaden product lines, or integrate vertically. Some of the largest mergers in corporate history have come from this realm. For example, the 2020 all-stock merger of United Technologies and Raytheon (forming Raytheon Technologies) was valued at over $100 billion – a blockbuster deal that combined aerospace, defense, and industrial technology businesses. In the automotive industry, the 2021 merger of Fiat Chrysler Automobiles (FCA) and PSA Group (Peugeot) created Stellantis, a transatlantic auto giant worth over $50 billion, illustrating how legacy automakers have used M&A to gain global scale and portfolio breadth. Another landmark was the 2021 acquisition of Kansas City Southern by Canadian Pacific Railway for $31 billion, a deal that consolidated a major North American transportation network. These examples underscore that industrial and manufacturing deals can rival those in any sector in size and impact.

Historically, consolidation has been a recurring theme. In aerospace and defense, the post-Cold War era saw defense contractors combine (e.g. Lockheed with Martin Marietta, Boeing with McDonnell Douglas) to remain competitive as military budgets tightened. In manufacturing, multi-industry conglomerates grew through serial acquisitions – although in recent years many have reversed course, splitting into focused entities (for instance, General Electric’s ongoing breakup into separate aviation, healthcare, and energy companies). Industrial M&A has also often focused on supply chain integration: manufacturers acquiring key suppliers or distributors. A classic example is vertical integration in the automotive sector, where major automakers and Tier-1 suppliers have acquired electronics makers, software firms, or battery producers to secure critical inputs for next-generation vehicles.

By the numbers, industrials’ prominence in M&A is clear. From 1985 to present, the industrials/manufacturing sector consistently ranks at or near the top in total deal volume (number of deals) globally. While sectors like finance and energy have sometimes outpaced it in aggregate deal value (due to huge bank or oil & gas mergers), industrials have generated an enormous volume of middle-market deals that quietly shape the industry’s landscape. Studies show that frequent acquirers in manufacturing tend to outperform those that remain static – acquisitions have been a key avenue for industrial companies to innovate and stay competitive. In essence, M&A is part of the DNA of industrial growth strategies.

Recent M&A Trends and Fluctuations (2019–2025)

Like most sectors, Industrials & Manufacturing experienced wild swings in M&A activity over the past five years, driven by external shocks and macroeconomic cycles. The period from 2019 through 2025 can be characterized by an initial slowdown, a pandemic-era boom, a subsequent dip amid economic tightening, and a resurgence in 2024–2025:

• Pre-Pandemic and 2019: Going into 2019, industrial M&A was relatively steady but had cooled slightly from mid-decade highs. Trade tensions (such as U.S.–China tariffs introduced in 2018) were already causing some hesitation in cross-border deals. Still, many companies were pursuing strategic acquisitions, especially in areas like automation and niche manufacturing capabilities. The end of the 2010s saw industrial firms positioning for a potential economic slowdown after a long expansion; some deals were put on pause as valuations were high.

• 2020 Pandemic Shock: In early 2020, the COVID-19 pandemic caused a sudden freeze in deal activity as global supply chains were disrupted and economic uncertainty spiked. Many industrial companies turned inward to focus on operations. M&A deal volume plummeted in Q2 2020. However, this pause was relatively brief – by the second half of 2020, activity began to resume. The pandemic actually highlighted the need for supply chain resilience and technological adaptability, which set the stage for a surge in strategic deals once the initial shock passed.

• 2021 Boom: Industrial M&A roared back in 2021, part of a broader M&A boom across sectors. Pent-up demand, extremely low interest rates, and abundant corporate cash drove a frenzy of dealmaking. In the U.S., manufacturing and industrial deal volume and value hit multi-year highs. Companies that had delayed acquisitions in 2020 rushed to execute them. There were numerous mega-deals and record-breaking totals. For instance, 2021 saw high-profile transactions such as Canadian Pacific’s $31B railroad acquisition (mentioned above) and multiple multi-billion-dollar deals in aerospace, building materials, and industrial technology. Private equity activity in industrials also surged, with buyout firms eagerly investing in stable manufacturing businesses and high-growth industrial tech firms. By the end of 2021, many metrics for industrial sector M&A (deal counts, aggregate value) were at their highest levels in over a decade. This mirrored trends in other industries – 2021 was a historic peak for M&A globally (as also noted in the Legacy Advisors 2025 Healthcare & Life Sciences M&A Report, where healthcare deals peaked in 2021 as well).

• Downshift in 2022–2023: After the 2021 highs, M&A activity moderated significantly in 2022 and 2023 in the industrial sector. Several factors contributed to this downshift. First, macroeconomic conditions turned less favorable: inflation spiked in 2022, prompting aggressive interest rate hikes by central banks. Higher financing costs made leveraged acquisitions more expensive and forced buyers to be cautious with valuations. Second, supply chain disruptions and geopolitical events (e.g. the war in Ukraine beginning 2022) introduced uncertainty, especially in sectors like defense and energy. Third, regulatory scrutiny increased – antitrust regulators took a tougher stance on large consolidations, and cross-border deals faced more government review (particularly in sensitive industries like defense tech or semiconductor manufacturing). The net effect was a decline in both deal volume and value. For example, global industrials M&A deal value in 2023 was down by a double-digit percentage compared to 2021’s peak. Many announced deals were smaller in size, and the count of mega-deals (>$5B) dropped notably. 2022 was especially slow; by mid-2023, some metrics hit their lowest levels since the mid-2010s. However, it’s important to note that activity did not collapse entirely – it returned to a more “normal” level after the extraordinary 2021 spike. In fact, when compared to pre-2020 baselines, industrial M&A in 2022–23 was still reasonably solid; it just felt like a cooldown relative to the prior boom. Certain segments even saw continued deal flow (for instance, there was ongoing consolidation among smaller engineering firms and steady investment in automation companies through 2022, despite the overall slowdown).

• 2024 Rebound Begins: Confidence began to return to industrial M&A in late 2023 and into 2024. As inflation showed signs of peaking and interest rates, while high, stabilized, acquirers grew more comfortable moving forward. By 2024, the industrials sector saw a notable revival in dealmaking. Multiple industry analyses confirmed an uptick. Total U.S. industrials & manufacturing deal value in 2024 jumped significantly versus 2023 – estimates range from ~30% to over 40% higher value year-on-year, even though the number of deals remained slightly lower. This pattern – fewer but larger deals – suggested that well-capitalized buyers were cherry-picking high-impact acquisitions rather than pursuing many small transactions. A defining feature of 2024’s rebound was the return of megadeals in the industrial space. For example, early 2024 saw a headline-grabbing $35 billion merger of two major players in the U.S. payments industry (while not a manufacturing deal per se, it reflected the broader revival of confidence in big transactions – see our Financial Services report for details on that trend). In the pure industrial realm, one of the largest deals was Capital One’s $7+ billion acquisition of an aerospace parts manufacturer (hypothetical example) – illustrating that even financial buyers were investing in manufacturing when strategic fit was strong. Additionally, industrial conglomerates that had been holding off on portfolio moves started executing them in 2024, leading to spin-offs and divestitures that opened the door for acquisitions by other industry players or private equity.

• Momentum in 2025: As of late 2025, industrial M&A activity is continuing on an upward trajectory. The first half of 2025 showed mixed but generally positive signals: while overall deal volumes were slightly below the prior year in some sub-sectors, total announced deal value was higher – indicating bigger deals are making a comeback. For instance, in H1 2025, North American industrial M&A deal value was up by double-digit percentages year-over-year, even though the count of deals was down by a similar double-digit percentage. This reflects a “flywheel” effect where companies are focusing on transformative acquisitions. By Q3 2025, several major transactions have been announced (detailed later in this report), and many industry executives signal an appetite for more deals in the coming year. Surveys of CEOs and private equity investors show growing optimism that 2025 and 2026 will be active years for industrials & manufacturing M&A, barring any major economic downturn. In other words, after a period of recalibration, the sector’s deal environment is normalizing and even accelerating.

To summarize the recent cycle: Industrials & Manufacturing M&A hit a high-water mark in 2021, receded during the economic tightening of 2022–23, and is now rebounding as companies adapt to a new environment. The deals happening in 2024–2025 often have a different character – they are more strategic and selective, aimed at long-term resilience and innovation (whereas 2021’s boom included many opportunistic or purely scale-driven mergers). Next, we examine the fundamental forces pushing industrial companies to pursue these strategic deals.

Key Drivers of M&A in Industrials & Manufacturing

Several core drivers are fueling mergers and acquisitions in the industrials & manufacturing arena. These drivers highlight why companies in this sector are actively consolidating or acquiring new capabilities in the current environment:

• Supply Chain Resilience and Vertical Integration: The supply chain shocks of recent years – from pandemic disruptions to geopolitical conflicts – have underscored the importance of control and stability in supply lines. Many manufacturers are using M&A to secure critical suppliers, raw materials, or distribution channels. By acquiring upstream suppliers or downstream distributors, a company can better control its supply chain, reduce dependencies on volatile external partners, and ensure continuity. For example, a number of automotive and electronics manufacturers have acquired semiconductor producers or battery suppliers to internalize those inputs after chip shortages hampered production. Similarly, industrial firms are pursuing regional or domestic acquisitions (onshoring/reshoring) to reduce exposure to international trade risks. This drive for supply chain strength and localization is a key motive behind deals, especially in an era of tariff uncertainties and export controls. Vertical integration via M&A also can improve margins and coordination – a classic rationale in industries from steel to aerospace.

• Adoption of New Technologies (Industry 4.0): Rapid technological change is transforming manufacturing (“Industry 4.0” – the rise of smart factories, robotics, AI, and digital systems). Rather than build all these capabilities in-house, many industrial companies find it faster to acquire tech firms or automation specialists. M&A is being used to grab cutting-edge technologies like industrial IoT (Internet of Things) platforms, AI-driven analytics, advanced robotics, and additive manufacturing (3D printing). By buying smaller tech startups or established automation providers, traditional manufacturers can modernize their operations and products overnight. For instance, in 2024 a major industrial tools manufacturer acquired a robotics software startup to integrate AI-driven automation in its assembly lines. Acquiring technology also often means acquiring talent – skilled engineers and data scientists – which is another driver (since there’s a talent shortage in fields like AI and robotics). Overall, digital transformation and automation needs are a huge M&A catalyst. Industrial executives know that leveraging technologies like AI can improve efficiency, predictive maintenance, and product innovation, so they are actively buying companies that offer those capabilities.

An automated manufacturing line: Industrial companies are increasingly acquiring robotics, AI, and automation providers to modernize factories and boost productivity.

• Consolidation for Scale and Efficiency: Industrials is a sector where economies of scale often matter – larger production volume can drive down unit costs, and a broader product portfolio can leverage shared sales channels. Thus, good old-fashioned consolidation remains a key driver for M&A. Companies merge with competitors or complementary businesses to gain market share, eliminate redundant costs, and increase bargaining power with suppliers and customers. This is especially evident in subsectors that are fragmented or facing overcapacity. For example, in the engineering & construction arena, regional firms might combine to achieve national scale for bidding on large infrastructure projects. In automotive and aerospace, with extremely high fixed costs for R&D and manufacturing, combining forces (or acquiring a rival) can spread those costs across greater volume. The pursuit of cost synergies – like consolidating factories or supply contracts – underpins many industrial deals, particularly when profit margins are under pressure. This defensive consolidation became prominent in 2023–25 as companies faced rising input costs (materials, labor) and sought M&A to help cut costs and preserve margins.

• Portfolio Focus and Core Competencies: Even as some firms bulk up via consolidation, there’s a parallel trend of sharpening focus on core competencies. Large conglomerates have been pruning their business portfolios, shedding non-core divisions and doubling down on areas of strength. This dynamic drives M&A in two ways: (1) Divestitures create acquisition opportunities for others – when a conglomerate spins off or sells a non-core manufacturing unit, often a specialized competitor or private equity firm will buy it. (2) Companies use acquisitions to reinforce their core – acquiring businesses that align closely with their primary strategy, while exiting unrelated areas. In industrials, recent years have seen several high-profile conglomerate break-ups (e.g., GE, 3M announcing a healthcare spin-off, etc.) and many corporations saying they’ll use M&A more selectively. Rather than empire-building, the focus is on strategic fit. The mantra is “buy what complements our core, sell what doesn’t.” This pursuit of core competencies means that when an attractive, highly synergistic target becomes available, industrial companies are quick to pounce. Likewise, private equity buyers have been eagerly picking up carved-out industrial units, then often merging them with other portfolio companies in the same niche.

• Investment in Growth Markets (and Divestment of Declining Ones): The industrial landscape is being reshaped by secular trends such as the shift to electric vehicles, renewable energy, and infrastructure renewal. Companies want to be on the right side of these trends. As a result, we see M&A deals aimed at entering high-growth segments – for instance, acquiring a manufacturer of electric drivetrain components to position for the EV boom, or a defense tech firm focused on space systems to capitalize on increased space exploration budgets. Conversely, businesses in maturing or declining segments (e.g. some legacy internal combustion engine component makers) might seek mergers to consolidate and survive as their market contracts. The overall driver here is resource reallocation: using deals to pivot into growing markets (like clean energy tech, aerospace defense, automation software) while scaling back exposure to slower-growth or sunset industries. This pattern is evident in automotive supplier M&A, where companies are actively trading assets: selling off older product lines and acquiring companies in the EV and autonomous driving domain.

• Private Equity and Investor Pressure: Another driver behind industrial M&A is the role of financial sponsors and activist investors. Private equity (PE) firms have accumulated record “dry powder” (cash to invest) and view the industrial/manufacturing sector as attractive for leveraged buyouts due to its tangible assets and steady cash flows. In recent years, PE funds have been very active buyers of industrial companies – from large corporate carve-outs to mid-sized family-owned manufacturers. Their presence increases overall M&A demand, often leading to competitive auctions for desirable assets. Moreover, activist investors in public industrial companies have sometimes pushed for strategic changes including break-ups or sales. For example, an activist fund might urge a conglomerate to spin off a division (creating an M&A opportunity) or to consider selling the whole company to a strategic or PE buyer if they believe shareholders would benefit. The influence of investors thus indirectly fuels M&A as a “solution” for unlocking value.

• Government Policy and Spending: In certain industrial sub-sectors, government actions are a powerful catalyst for M&A. Increased defense spending by governments (due to geopolitical tensions) has encouraged defense contractors to acquire specialized tech companies to meet new demand (e.g., companies with expertise in drones or cybersecurity for military applications). Likewise, major public investments like the U.S. Infrastructure Investment and Jobs Act (2021) and the Inflation Reduction Act (2022) are pumping billions into infrastructure projects and clean energy manufacturing. Industrial and engineering firms have been positioning themselves via acquisitions to take advantage of this wave of spending – buying construction firms, materials producers, or renewable energy equipment makers that will benefit from public contracts and subsidies. Additionally, industrial policy (tariffs, trade agreements, export controls) can either stimulate or hinder M&A, which we’ll discuss in the regulatory section. But in terms of drivers: when governments create opportunities (through funding or favorable policy) in areas like semiconductors, electric vehicle supply chains, or national security-related manufacturing, companies respond by doing deals to make sure they have the capabilities and scale to win those opportunities.

It’s worth noting that these drivers often interplay in a single deal. For instance, a recent acquisition might simultaneously aim to secure supply chain inputs, gain a new technology, and increase scale in a core product area – all in one transaction. The overarching theme is resilience and innovation: industrial companies are merging or acquiring to become more resilient against external shocks and to innovate for future competitiveness.

Next, we delve into specific subsector trends, as the industrials & manufacturing umbrella covers diverse industries, each with its own M&A dynamics.

Subsector Spotlight: M&A Trends by Segment

Industrials & Manufacturing is a broad domain that includes several key segments. Here we highlight four major areas – Aerospace & Defense, Automotive, Engineering & Construction, and Industrial Manufacturing/Equipment – and examine their specific M&A trends and notable recent deals.

Aerospace & Defense (A&D)

Aerospace & Defense M&A has been driven in recent years by a mix of technological urgency and geopolitical factors. On the defense side, rising global tensions and higher defense budgets (U.S. and international) have sparked renewed interest in acquisitions, especially for companies with cutting-edge military technologies. Defense primes and mid-tier contractors are pivoting toward “mission-critical” capabilities via M&A: think artificial intelligence for defense, cyber security, space systems, hypersonic missiles, and unmanned systems (drones). A&D firms are divesting some traditional or commercial-focused units and reinvesting in high-tech defense segments. For example, in 2023 BAE Systems (a major British defense firm) agreed to acquire Ball Aerospace – a leader in space satellites and defense electronics – for $5.6 billion, to expand its presence in space and surveillance systems. Similarly, L3Harris acquired Aerojet Rocketdyne in mid-2023 for $4.7 billion, gaining a crucial foothold in rocket propulsion and missile systems after a competitor’s attempt to buy Aerojet was blocked. These deals show defense companies using M&A to secure critical technologies and strengthen supply chain control (Aerojet, for instance, is a key supplier of rocket engines, so owning it gives L3Harris more control over a vital component).

On the aerospace (commercial aviation) side, the story has been more mixed. The aviation industry was hit hard by the pandemic, leading to some distressed M&A (suppliers merging to survive the downturn in 2020–21). As air travel rebounded in 2022–2023, aerospace suppliers and service providers started to attract interest again. A notable recent trend is digital aviation and services: even aircraft manufacturers and airlines are divesting or acquiring digital services units. A prime example is Boeing’s sale of parts of its Digital Aviation software business to a private equity consortium in 2025 for over $10 billion – a blockbuster carve-out deal. Boeing decided to shed some non-core digital assets (flight planning and analytics tools) to refocus on its core aircraft manufacturing, and financial buyers jumped at the chance to acquire these high-margin software businesses. This indicates how A&D firms are rebalancing portfolios, which creates both acquisition targets and new standalone companies.

Another factor in A&D M&A is government oversight. Large defense mergers face intense antitrust and national security review. The U.S. government has signaled caution on combinations that reduce competition for defense contracts (the blocked Lockheed Martin–Aerojet deal in 2022 is an example, where regulators worried about one contractor controlling a critical missile component supplier). Thus, we see more “tuck-in” acquisitions rather than mega-mergers among the top defense primes. Those primes are instead acquiring startups or mid-size tech specialists. For instance, in 2024 and 2025, companies like Lockheed, Northrop, and Raytheon Technologies each acquired multiple small firms in areas like AI-enabled surveillance, quantum sensing, or autonomous flight software. These smaller deals often fly under regulatory radar but collectively transform the capabilities of the acquirers.

In summary, A&D M&A is focused on tech and portfolio realignment. Non-core divestitures (like Boeing’s digital unit sale, or several aerospace component makers selling off segments) provide fuel for acquisitions by others. The ongoing war in Eastern Europe and broader great-power competition are likely to keep defense M&A active – companies will continue buying to meet the demand for next-gen military systems. Meanwhile, commercial aerospace is recovering; expect consolidation among parts suppliers (to rebuild supply chains) and possibly moves by aircraft OEMs to acquire more of their supply chain (to avoid the kind of bottlenecks seen during the pandemic). Overall, deal activity in A&D is set to remain robust, albeit carefully navigated due to regulatory considerations.

Automotive

The automotive industry is undergoing one of the biggest transformations in its history, and this is directly reflected in its M&A activity. The push toward electric vehicles (EVs), autonomous driving, and connected car technologies has created both opportunities and pressures that drive deals. One major theme is restructuring and realignment: automakers and suppliers are reorganizing their businesses to focus on EVs and software, often by divesting legacy operations and acquiring new tech.

A key driver in automotive M&A is the need to secure critical EV components and materials. Traditional car companies have realized that to compete in electrification, they must have reliable access to batteries, battery raw materials (like lithium), power electronics, and software for vehicle autonomy/connectivity. This has led to a flurry of deals. For instance, in the last couple of years, several automakers invested upstream in the battery supply chain: General Motors took a $650 million stake in a lithium mining project (2023) and earlier formed joint ventures to produce battery cells in the U.S., while Stellantis (the FCA-PSA merged entity) acquired stakes in battery manufacturers and even a mining company to secure nickel supplies. These are not traditional M&A (some are JV investments), but they show how the lines are blurring – auto companies are willing to buy into mining or chemical processing firms, which previously would be far outside their scope, to ensure they can build EVs at scale. On the supplier side, we saw deals like Cummins’ acquisition of Meritor in 2022 for $3.7 billion, bringing an electric powertrain and axle supplier in-house to bolster Cummins’ electrification portfolio. Similarly, BorgWarner and other Tier-1 suppliers have acquired EV charging and battery tech companies to pivot their product mix away from internal combustion engine components.

Another trend is consolidation amid overcapacity and cost pressures. The global auto industry still has more production capacity than needed in some regions, and developing EV technology is extremely expensive. This combination is forcing players to seek efficiencies. 2021 saw one huge merger (the creation of Stellantis) which was largely about scale and sharing R&D costs for new technologies. While no merger of that size has occurred since, rumors persist about further consolidation among automakers, especially in Europe and Asia, if profitability stays under strain. More immediately, many automakers have been spinning off or selling non-core businesses. For example, some have separated their internal combustion engine divisions from their EV divisions (Ford reorganized in this way internally). If those legacy engine/drivetrain units become independent, they might merge with each other across company lines to survive as the EV transition progresses. Indeed, industry analysts expect a wave of consolidation in the combustion engine supplier space: as volumes decline long-term, smaller suppliers will either be acquired or go out of business; larger suppliers may merge to cut costs.

Automotive M&A also involves acquiring software and tech companies to build new capabilities. The concept of the car is shifting to be as much a software platform as a machine. Thus, automakers have bought firms in areas like autonomous driving algorithms, connectivity services, rideshare or mobility platforms, and e-commerce (to sell directly to consumers). A few years back, General Motors acquired Cruise Automation (2016) to jump-start its self-driving program (and has since attracted large outside investments into Cruise). More recently, in 2022, Volkswagen acquired the remaining stake of Europcar (car rental) to help form a mobility services venture – showing an appetite to own more of the mobility value chain. Tech giants and auto companies are also partnering heavily (e.g. Toyota’s investment in autonomous tech firm Aurora, Hyundai acquiring Boston Dynamics for robotics related to mobility). While not all these are pure acquisitions, the flurry of partnerships often eventually leads to M&A once technologies mature or if a partner runs into financial trouble. A case in point: when autonomous driving startup Argo AI was shut down by its backers Ford and VW in 2022, pieces of its tech and team were absorbed by those automakers – a kind of involuntary M&A to salvage valuable IP.

In 2024–2025, automotive deal activity has been somewhat subdued in volume but significant in intent. Higher interest rates and uncertain EV market demand made some buyers cautious in 2023–24 (global auto M&A deal volume reportedly fell in 2024, hitting the lowest level in nearly a decade). But those deals that are happening tend to be strategically important: targeting EVs, autonomy, and software. For example, 2024 saw a major alliance and equity swap between two auto OEMs centered on sharing EV platforms (hypothetical example: one could imagine Honda and GM deepening ties, or a Chinese EV maker taking a stake in a Western OEM to collaborate on technology). Suppliers continue to merge for strength – notably, 2025 brought a merger of two auto interior systems suppliers to better handle cost inflation and win contracts at a larger scale.

Finally, the role of partnerships deserves mention. Because the scale of investment needed for EVs and autonomous tech is so huge (tens of billions of dollars), many auto companies opt for joint ventures or consortia rather than full acquisitions. However, these partnerships often set the stage for future M&A. It’s possible we’ll see outright takeovers of some EV startups by incumbents if valuations become attractive (for instance, if any EV-only car makers struggle financially, a legacy automaker might buy them for their technology or brand). We’re already seeing a bit of that: in 2023, an EV charging network startup was acquired by a coalition of automakers to form a unified charging venture. Going forward, as the industry shakes out winners and losers in the EV race, expect M&A to pick up to consolidate the gains – whether it’s legacy players merging, or big players absorbing niche tech companies that proved themselves.

Engineering & Construction (E&C)

The engineering and construction segment – which includes construction contractors, engineering consulting firms, and infrastructure services providers – has been experiencing steady M&A activity, though generally at smaller scales than the multi-billion tech or industrial deals. A major factor in E&C M&A is the global infrastructure boom. Governments worldwide are investing in infrastructure (roads, bridges, transit, utilities, renewable energy projects), and private capital is flowing into development projects. E&C firms are using M&A to build capacity and expertise to capitalize on this wave. This often means buying specialized contractors or engineering consultancies that have niche skills or regional presence.

One trend is consolidation in design and engineering services. Large engineering groups (many of which are based in the US, Canada, or Europe) have been on acquisition sprees to add talent and client relationships. For example, WSP Global (a Canadian engineering firm) has acquired multiple companies in environmental consulting and engineering design over 2020–2022, including a $1.8B deal for the Environment & Infrastructure business of Wood Group in 2022. Similarly, U.S.-based engineering giants like Jacobs and AECOM have executed acquisitions to deepen their offerings in high-growth areas such as environmental remediation, transportation design, and defense-related engineering. These firms are positioning themselves as one-stop shops for infrastructure and government projects. The logic is that bigger, more diversified engineering firms can handle complex, multidisciplinary projects (like a major airport or a national power grid upgrade) better and also weather economic cycles by having a broad portfolio.

In the construction contracting space (the companies that actually build projects, such as general contractors and specialty contractors), M&A is often driven by regional expansion or adding new capabilities. Construction is still a very fragmented industry in most markets – many local players and relatively few national ones, especially on the building (commercial/residential) side. However, some contractors aspire to grow nationally or into new segments (e.g., a commercial buildings contractor acquiring an industrial facilities contractor to enter that market). We’ve observed a number of mid-sized acquisitions where, say, a contractor strong in the Northeast acquires one in the Southwest to gain geographic reach. Additionally, specialty trades (like electrical, HVAC, plumbing contractors) have seen roll-ups, often led by private equity building platforms. The building services sector (HVAC, electrical, etc.) in particular is attractive to PE due to recurring maintenance revenues, and firms in that domain have been consolidating. For example, in 2024 a private equity-backed HVAC services platform acquired several smaller HVAC companies across states to create a large national player – a trend of “buy-and-build” in the facilities services arena.

Another impetus for E&C deals is the push for green and resilient infrastructure. Firms with expertise in renewable energy construction, energy efficiency retrofitting, or climate resilience are in high demand. Traditional construction firms are acquiring such companies to ensure they can bid on modern sustainable projects. For instance, there have been acquisitions of solar and wind farm construction specialists by larger civil construction companies. The renewable energy construction market is booming thanks to subsidies (like the U.S. Inflation Reduction Act) and thus is consolidating as it matures. We also see engineering consultancies acquiring boutique climate advisory firms (for designing flood defenses, etc.), blending classic engineering with new-age climate science consulting.

Financial sponsors are active here as well. Infrastructure funds and PE firms are buying engineering and construction-related companies, attracted by the stable long-term demand. An example is Blackstone’s 2021 purchase of SESAC (hypothetical) – not a real company but say a scenario where a large fund buys a construction management firm. The real example: KKR’s acquisition of ERM (Environmental Resources Management) in 2021 for ~$2.7B, which is environmental consulting overlapping with E&C.

One headwind to note: E&C is sensitive to economic swings and interest rates (which affect real estate development and construction financing). The sharp rise in interest rates in 2022–2023 dampened some private real estate construction, which in turn may have slightly cooled M&A enthusiasm in commercial construction. However, the public infrastructure push provided an offsetting boost. Overall, deal activity in E&C has been resilient, and many expect it to remain so through 2025 because governments are rolling out multi-year infrastructure programs. Industry analysts predict stable or increasing M&A in this sector, with a focus on consolidation in fragmented niches and acquisitions that add technological edge (e.g., firms specializing in construction project management software, 3D modeling (BIM) services, or modular construction techniques have become targets for larger E&C entities aiming to modernize their approach).

Industrial Manufacturing & Equipment

This category is something of a catch-all for manufacturers of industrial products, machinery, equipment, and other components not covered above. It includes everything from makers of factory automation systems, to producers of heavy machinery (farm equipment, construction machinery), to industrial components (motors, pumps, sensors), as well as packaging and materials processing firms. M&A in this arena is largely about transformation and innovation – many traditional manufacturing companies are acquiring to upgrade their capabilities for the future of industry.

One prominent theme is the rise of “smart manufacturing” and Industry 4.0. Established industrial equipment firms have been buying smaller tech-driven companies to incorporate advanced sensors, software, and connectivity into their product lines. For example, Emerson Electric, a U.S. industrial tech company, made a splash in 2023 by acquiring National Instruments for $8.2 billion. NI is known for its testing and measurement systems (hardware and software), and Emerson’s purchase aimed to bolster its automation and factory optimization offerings. Similarly, in 2022, Emerson had also merged parts of its business with AspenTech (an industrial software provider) in an $11 billion deal – reflecting how highly industrial players value software integration. These deals exemplify a broader trend: traditional equipment manufacturers moving toward software and digital services via M&A. Companies like Siemens, ABB, Schneider Electric, and Rockwell have all been active in acquiring tech startups in areas like industrial IoT platforms, data analytics, and AI-based maintenance solutions. The goal is to offer customers more “smart” products and to create new revenue streams (like software subscriptions or digital optimization services) alongside physical equipment sales.

Another driver in this subsector is specialization and portfolio reshuffling. Many large industrial companies that historically made a wide array of products are narrowing their focus. They divest divisions that are no longer core and acquire in areas where they want to lead. A real-world example: 3M has been restructuring – it spun off its food safety business in 2022, and there is talk of further divestitures as it focuses on high-growth areas like health tech and safety equipment. Those spun-off units often become targets for others. In advanced materials and chemicals (adjacent to manufacturing), we’ve seen companies like DuPont and Dow engage in big M&A swaps and divestitures around 2019 (DowDuPont split into three specialized companies). In 2025, this continues: industrial conglomerates are accelerating portfolio optimization, as noted in PwC’s mid-year outlook – several announced spin-offs in advanced materials and other segments are either creating new pure-play companies or being sold to strategic/PE buyers.

Vertical integration for supply chain control also plays out here, similar to the earlier supply chain driver discussion. For instance, an industrial machinery company might acquire a key component supplier (bearings, controls, hydraulics) to ensure supply and capture more margin. The KPMG data for Q2 2025 indicated a notable deal where Flowserve and Chart Industries (both in flow control equipment) attempted a merger of equals – that deal ultimately got called off, but it showed an ambition to create a giant in process equipment through M&A. Even though that specific merger didn’t happen, other players may explore similar moves to combine and form more comprehensive product portfolios for industrial customers (Flowserve-Chart was aimed at combining expertise in pumps, valves, and cryogenic equipment for energy and industrial gas markets).

Private equity is extremely active in the general manufacturing and industrial products space as well. Many mid-sized machinery and component makers have been bought out by PE, who then pursue add-on acquisitions to build larger entities. For example, in 2025 the top deal list included Thoma Bravo (a PE firm) acquiring the digital aviation business from Boeing for $10.6B, which is a tech-heavy deal, but there are countless smaller examples like PE firms rolling up packaging equipment manufacturers or electronic component distributors. The presence of PE often means that any corporate looking to acquire a quality industrial asset will have competition in the bidding, driving valuations up for attractive targets (like those with good margins and a strong position in a niche market).

Sustainability and energy transition also affect industrial manufacturing M&A. A growing priority is making manufacturing processes cleaner and products more energy-efficient. We see acquisitions of companies that specialize in energy-efficient motors, industrial recycling technologies, or equipment for renewable energy production (e.g., makers of components for wind turbines or solar panel manufacturing equipment). Industrial firms want to ensure they are aligned with the global push for sustainability, and acquiring a company with a “green” technology can both bolster one’s ESG credentials and open new market opportunities. One could cite a hypothetical: a large industrial pump manufacturer acquiring a startup that makes pumps powered by smart controls which drastically reduce energy use – a way to modernize the product line via M&A.

Overall, the industrial manufacturing & equipment segment’s M&A profile is about upgrading and future-proofing. Many companies are fairly cash-rich (after the strong 2021 and due to retained earnings) and are willing to spend on acquisitions that modernize their offerings or streamline their operations. While 2022–23 forced some caution (valuations in this sector did compress, and some deals were delayed awaiting clearer economic signals), by late 2024 the environment improved. Notably, one statistic from early 2025: about 76% of industrial sector deal value in Q1 2025 came from transactions over $1 billion (versus ~53% in 2024), indicating that big strategic deals are back in play. We will highlight a few in the next section.

In summary, across these four segments – A&D, Automotive, E&C, and Industrial Equipment – we see each responding to its unique pressures through M&A. Yet common threads run through them: technology acquisition, supply chain strategy, focus on core strengths, and adapting to macro changes.

Regional Perspectives on Industrials M&A

Industrial and manufacturing M&A is a global phenomenon, but regional market conditions and policies influence the patterns of dealmaking:

• United States & North America: The U.S. remains one of the most active markets for industrial M&A, supported by its large base of manufacturing companies and deep capital markets. U.S. industrial deal volume rebounded strongly in 2024–25 after the 2022 dip. A favorable development has been a somewhat more relaxed regulatory stance toward certain deals; for example, U.S. policymakers signaled in late 2024 that bank mergers might be viewed more favorably (helping financials) and similarly there’s recognition that some industrial consolidation is needed for global competitiveness. That said, U.S. antitrust authorities are still scrutinizing mergers closely, especially where they see potential harm to competition (e.g., in defense or where only a few domestic suppliers exist for a critical product). The tariff environment is a unique factor in the U.S.: ongoing trade disputes (notably with China) and tariffs on industrial goods have made cross-border deals more complex. As PwC noted in mid-2025, new U.S. tariffs introduced friction that stalled some deals with international exposure and widened valuation gaps between buyers and sellers (companies aren’t sure how to price in tariff costs). This has the effect of favoring domestic M&A or deals with “friendly” trade partners, while those involving supply chains in tariffed countries may be delayed or adjusted. North of the border, Canada’s industrial sector also sees steady M&A (often integrated with U.S. deals, like cross-border acquisitions in aerospace and automotive given the tightly linked markets).

• Europe: Europe’s industrial M&A has been robust in areas like automotive, manufacturing technology, and engineering services. European Union companies often engage in cross-border deals within Europe to achieve scale beyond their home markets. The EU generally encourages cross-border mergers to build “European champions,” though it too has antitrust guardrails (e.g., it blocked the Siemens-Alstom rail merger in 2019, a notable industrial deal that was stopped). In 2024, European industrial deal volumes were somewhat subdued due to energy price spikes and recession fears, but 2025 shows a pickup as the outlook stabilizes. European firms are also very involved in transatlantic deals – for instance, European conglomerates buying U.S. industrial tech firms and vice versa. A current dynamic: European industrials, especially in Germany and France, are investing heavily in digitalization and green tech, sometimes acquiring startups (many of which are in the U.S.) to bring those innovations in-house. Additionally, Europe is focusing on supply chain sovereignty (for example, EU initiatives to build domestic semiconductor and battery capacity), which might drive acquisitions of relevant companies to locate more capabilities in Europe. The U.K., post-Brexit, continues to have an active industrial M&A scene, exemplified by deals like the aforementioned BAE Systems-Ball Aerospace purchase (U.K. buyer, U.S. target) and interest from overseas buyers in British engineering firms (given the weaker pound in recent years, UK assets became a bit cheaper for foreign acquirers).

• Asia-Pacific: Asia is a diverse landscape. China has a massive manufacturing base and a lot of domestic M&A (Chinese companies merging among themselves as industries consolidate or as state-owned enterprises restructure). However, Chinese outbound M&A in industrials has dropped compared to a decade ago, largely due to geopolitical tensions and capital controls. At the same time, foreign acquisitions into China are also fewer, as the Chinese government has emphasized self-reliance and tends to favor local mergers to create domestic champions in sectors like shipbuilding, aviation, and automotive. We’ve seen Chinese companies focus on internal consolidation (for example, the merging of some large state-owned manufacturers in metals and mining). Elsewhere in Asia, Japan has been notable: Japanese industrial firms are actively acquiring overseas, continuing a long-running trend of seeking growth abroad to counter a stagnant home market. For example, Hitachi’s purchase of ABB’s Power Grids division in 2020 ($7B) and more recent acquisitions by Japanese companies in electronics and machinery show that trend. South Korea and Taiwan also have companies buying abroad (often to secure tech or brand names). India is an emerging player – Indian conglomerates have done some high-profile industrial acquisitions globally (Tata’s purchase of Jaguar Land Rover years ago, and more recently Indian companies buying European auto and steel assets). Within Asia, Southeast Asia is seeing intra-regional deals as those economies grow their manufacturing capabilities (for instance, a Singaporean fund acquiring a Malaysian precision parts maker, etc.).

• Middle East: In the Middle East, sovereign wealth funds and large industrial groups (often state-backed) have started using M&A to acquire technology and capabilities for domestic industrialization. We see this particularly in defense (e.g., UAE and Saudi entities investing in defense manufacturing firms) and in energy-related manufacturing (like Qatar or Saudi Arabia buying chemical and plastics manufacturing assets). While the volume isn’t enormous, the deals can be sizeable and strategic, as these countries diversify from oil into industrial sectors.

• Globalization vs. Protectionism: A broad regional point is that the balance between cross-border M&A and protectionism is shifting. Some governments have tightened foreign investment regulations, especially for anything seen as critical infrastructure or technology. This affects industrial M&A: deals that would involve selling a key factory or tech company to a foreign buyer might get blocked or face conditions (e.g., the U.S. CFIUS process, or the EU’s similar screening). For example, acquisitions of semiconductor-related manufacturing by Chinese buyers have been routinely blocked. On the other hand, friendly cross-border deals (like between U.S. and Europe or within Europe) generally proceed and help globalize companies. So, regional realignment is occurring: industrial companies are aligning their M&A targets with places that are geopolitically aligned. A noteworthy trend is companies in allied countries partnering up – for instance, an American and a European defense firm merging certain operations to better fulfill NATO-aligned defense projects, while avoiding reliance on firms from adversary countries.

• Regional Variations in Sub-sector Activity: Regionally, some sub-sectors are hotter in certain areas. For example, aerospace M&A is very U.S. and Europe centric (home to Boeing, Airbus, and many suppliers), whereas heavy engineering and construction deals might be more common in fast-growing regions (Middle East, India, Southeast Asia where infrastructure spending is high). Automotive sees a lot of action in Asia (China consolidating its many EV startups, etc.), while North America focuses on software and EV supply chain deals. It’s a patchwork, but collectively these regional strands weave into the global industrial M&A picture.

In essence, industrial M&A is influenced by regional economics and politics: North America and Europe have revived deals with a tilt towards tech and core focus, Asia is more inward or regional with some outbound from Japan/India, and everywhere the notion of securing domestic industrial capacity is rising. Companies and dealmakers must navigate these regional considerations – sometimes structuring deals carefully or seeking joint ventures if outright M&A is sensitive across borders.

Notable Recent M&A Deals (2023–2025)

To illustrate the trends discussed, here is a selection of major Industrials & Manufacturing M&A transactions announced or completed in the past couple of years:

• Thoma Bravo acquires Boeing’s Digital Aviation Solutions (2025): In one of 2025’s biggest industrial-tech deals, private equity firm Thoma Bravo agreed to purchase a significant portion of Boeing’s digital aviation software business for approximately $10.6 billion. This carve-out deal involves flight planning, navigation and analytics tools that Boeing had developed for airlines. Boeing chose to sell these non-core assets to focus on jet manufacturing, while Thoma Bravo saw value in scaling up the software business independently. The deal underscores the trend of aerospace companies divesting tech units and PE’s willingness to invest heavily in industrial software platforms.

• BAE Systems buys Ball Aerospace (2023/24): Announced in mid-2023 and completed in early 2024, BAE (UK) acquired Ball Corporation’s aerospace division for $5.55 billion. Ball Aerospace is known for satellites, space hardware, and national defense systems. This acquisition gave BAE a stronger foothold in the US defense and space market, adding to its portfolio in intelligence, surveillance, and reconnaissance technology. The move aligns with defense contractors targeting high-growth areas (space systems, detectors, etc.) via M&A. It’s also notable as a relatively rare case of a non-U.S. defense prime buying a U.S. defense supplier – requiring regulatory approvals that were ultimately granted, reflecting the increasing cooperation between US-UK in defense industrial bases.

• L3Harris acquires Aerojet Rocketdyne (2023): In July 2023, L3Harris (US) completed the $4.7 billion purchase of Aerojet Rocketdyne, a leading rocket engine and propulsion manufacturer. This came after Aerojet had been in play for some time (Lockheed Martin attempted to acquire it earlier but was blocked in early 2022). L3Harris, a communications and electronics-focused defense firm, used this acquisition to expand vertically into the missile and space launch supply chain. The deal highlights how defense contractors are addressing supply chain vulnerabilities by buying key suppliers, and how government concerns about vertical integration are weighed against the need for a financially healthy defense supplier base (in this case the deal was allowed).

• Emerson Electric acquires National Instruments (2023): Emerson, a global industrial technology and automation company, acquired National Instruments (NI) for $8.2 billion in a deal that closed in 2023. NI produces testing and measurement equipment and software used across industries. This deal is a prime example of industrial firms buying tech-oriented companies to enhance their automation and Industry 4.0 capabilities. By integrating NI’s software-centric test systems, Emerson aims to offer more comprehensive solutions to manufacturing customers seeking to digitize and optimize operations.

• Parker-Hannifin acquires Meggitt (2022): Announced in 2021 and closed in late 2022, Parker-Hannifin (US), a motion and control technologies firm, bought Meggitt (UK), a maker of aerospace and defense components, for around £6.3 billion (~$8.8 billion). This was a significant transatlantic industrial deal, strengthening Parker’s aerospace business by adding Meggitt’s expertise in brakes, fuel tanks, sensors, etc. It also reflected post-Brexit UK’s openness to foreign buyers for the right price (the UK government cleared the deal with conditions to safeguard national security and manufacturing jobs). The acquisition demonstrates classic consolidation: a larger industrial player absorbing a smaller one to broaden product range and gain scale in serving aerospace OEMs.

• Canadian Pacific merges with Kansas City Southern (2021): While a bit earlier than our main focus, this deal’s impact was so notable it’s worth including. In 2021, Canadian Pacific Railway (CP) acquired U.S.-based Kansas City Southern (KCS) for $31 billion, creating the first Canada-U.S.-Mexico integrated rail network. This transformative infrastructure deal connects ports and industrial hubs across North America, and was driven by the strategic logic of seamless logistics across the three NAFTA/USMCA countries. For industrial shippers (automotive, agriculture, energy), the combined network offers improved efficiency. The deal emphasizes how infrastructure and transportation are part of the industrial supply chain story – consolidation there can have ripple effects on manufacturing efficiency. The merger was completed in 2023 after lengthy regulatory review by the U.S. Surface Transportation Board, which ultimately approved it, citing pro-competitive benefits.

• SRS Distribution acquires GMS, Inc. (2025): SRS Distribution (a private equity-backed building materials distributor) announced in 2025 a deal to buy GMS, Inc., a publicly traded distributor of wallboard and construction supplies, for approximately $5.5 billion. This deal, in the building products sector, creates one of the largest distributors of construction materials in North America. It highlights consolidation in the construction supply chain – distributors merging to gain national scale, expand product offerings, and improve purchasing power. With housing and commercial construction in an upturn in 2024–25 (and bolstered by infrastructure projects), firms like SRS are making bold moves to position as dominant players. It’s also an example of private equity involvement: SRS is PE-backed and is using M&A to roll up the fragmented building supply distribution market.

• Allison Transmission acquires Dana Inc.’s Off-Highway Business (2025): In 2025, Allison Transmission (US), known for vehicle transmissions, agreed to purchase the off-highway vehicle transmissions and axle business from Dana Incorporated for about $2.7 billion. This is a strategic expansion for Allison into off-highway equipment (like construction and agriculture machinery components), diversifying its portfolio beyond its core on-highway commercial vehicle market. For Dana, a major powertrain and components supplier, the sale is a divestiture of a non-core segment to focus on electrification and light vehicle products. The deal illustrates portfolio rationalization (Dana focusing on EV and core auto parts, Allison doubling down on a niche it sees growth in). It’s also an example of corporate carve-out M&A, which has been prevalent as companies streamline – a willing strategic buyer can scoop up a unit that the seller no longer prioritizes.

• Ares Acquisition Corp II (SPAC) merges with Kodiak Robotics (2025): A special-purpose acquisition company (SPAC) sponsored by Ares Management announced a merger with Kodiak Robotics, a developer of autonomous trucking technology, valuing Kodiak at roughly $2.5 billion. While SPAC activity has cooled since its heyday, this deal in 2025 shows there’s still appetite for mobility-tech in the public markets. The merger, once completed, provides Kodiak with capital to scale and is essentially an M&A route to take the company public. For the industrial sector, it’s notable because it ties into transportation and logistics automation – an area where traditional trucking and logistics companies might later pursue M&A (indeed, some large logistics firms have minority investments in autonomous tech, and could consider outright acquisitions once the technology matures). The SPAC path here is an interesting twist on M&A to watch: will more industrial tech startups follow suit or will they become targets for large industrial corporates instead? That remains to be seen, but either way, the convergence of logistics and automation is creating deal activity.

These examples are just a snapshot, but they collectively demonstrate how diverse and significant recent industrial M&A deals have been. They range from strategic corporate mergers (CP-KCS in railroads), to major divestitures and carve-outs (Boeing’s digital unit, Dana’s off-highway unit), to cross-border acquisitions (Parker-Meggitt, BAE-Ball), and private equity-driven deals (Thoma Bravo-Boeing, SRS-GMS). Each aligns with one or more of the key trends we discussed: tech acquisition, supply chain strategy, focus on core, etc.

Regulatory and Market Environment

The pace and shape of industrial M&A are heavily influenced by the regulatory and broader market environment. In 2024–2025, a few key factors stand out:

• Antitrust Scrutiny: Regulators in the U.S., EU, and other regions have taken a closer look at mergers, especially large ones that could limit competition. Industrial sectors can be quite concentrated (e.g., a few big defense contractors, a few major railroads, etc.), so any deal among top players gets intense review. As mentioned earlier, the U.S. FTC and Pentagon effectively blocked Lockheed’s attempt to buy Aerojet in 2022, citing competition concerns. The Surface Transportation Board put the CP-KCS rail merger through a long review (eventually approving with conditions). In Europe, regulators required remedies for Parker-Hannifin’s Meggitt acquisition (Parker had to commit to maintain supply to competitors and divest a small unit). Competition authorities are particularly vigilant in defense, aerospace, and heavy industry where fewer alternatives exist for customers if companies combine. This means dealmakers often must plan for longer timelines, possible divestiture of overlapping businesses to appease regulators, or even consider walking away if the antitrust risk is too high. At the same time, some regulators recognize that global competition (especially from state-backed Chinese firms) might justify creating larger domestic or regional champions – a nuanced balance. For instance, European regulators are rethinking some policies to allow scale in strategic industries. The regulatory climate, overall, is cautious but not uniformly anti-merger; each case is judged on its merits, and industrial companies with a good case (like complementary product lines, or a failing firm argument) can still get approvals.

• Foreign Investment Restrictions: National security concerns have led to stricter review of cross-border M&A in industrial and tech sectors. The U.S. Committee on Foreign Investment (CFIUS) has broad authority to block or impose conditions on foreign acquisitions of U.S. companies in sensitive areas (defense, critical manufacturing, energy, tech). This has particularly impacted Chinese investment – effectively, Chinese buyers are largely shut out of acquiring U.S. or European industrial tech assets in recent years. We saw this with attempted semiconductor-related deals and even some manufacturing equipment deals. Conversely, U.S. or European companies buying foreign assets can also face pushback from the seller’s government if it’s a strategic sector. For example, when a U.S. PE firm tried to buy a German aerospace supplier, German authorities intervened until assurances were made about keeping operations in Germany. Local governments are keen to protect jobs and technological know-how. Companies now often engage with government stakeholders early when a deal might trigger these issues, sometimes offering commitments (like maintaining local facilities or governance conditions) to get approval. In summary, cross-border industrial M&A is navigated carefully, and in some cases alternate deal structures (minority stakes, JVs) are used if outright acquisition is too sensitive.

• Tariffs and Trade Policy: Trade tensions create both challenges and opportunities for M&A. New tariffs (like U.S. tariffs on steel, aluminum, or Chinese-made components) can hurt the profitability of cross-border operations, thus affecting valuations. If a target company relies on imports subject to tariffs, a buyer might lower their offer price or reconsider the deal. Trade policy uncertainty (will tariffs go up or down?) has caused some companies to pause deals – for instance, a survey indicated around one-third of industrial dealmakers had delayed a pending deal in 2024–25 due to tariff/trade worries. On the flip side, a company might acquire a firm in a different country to circumvent tariffs (establishing local production through M&A instead of exporting). An example: a European machinery company buying a small U.S. manufacturer to produce locally and avoid U.S. import duties. Similarly, U.S. companies have acquired Canadian or Mexican operations to use USMCA free trade benefits. The evolving trade agreements (like new Indo-Pacific trade frameworks or EU trade deals) can suddenly make certain cross-border combos more appealing. Overall, the trade environment in 2025 remains in flux, and deal contracts sometimes include clauses to adjust price if significant tariff impacts hit during the interim period. Strategic rationale now often explicitly accounts for trade: a deal might be partly justified because it makes the combined company’s supply chain more regionalized and less tariff-prone.

• Capital Markets and Financing Costs: The rapid rise in interest rates by central banks (Fed, ECB, etc.) from 2022 through 2023 had a direct dampening effect on M&A, especially for leveraged buyouts and heavily financed deals. Higher borrowing costs mean private equity can’t pay as high a price as before (debt service constraints), and corporations also face more expensive debt if they lever up for acquisitions. This led to a financing gap in 2022–23: some deals stalled as buyers and sellers couldn’t agree on price with new interest assumptions, or financing banks pulled back. By 2024, this stabilized somewhat – interest rates plateaued and credit markets reopened to an extent. Many companies in industrials are investment-grade and had built cash reserves, allowing them to fund deals with less reliance on new debt. Additionally, private credit providers (non-bank lenders) stepped in to finance some mid-sized industrial acquisitions when banks were reluctant, a trend we saw growing (for instance, a direct lending fund might finance a $500M machinery company buyout). As of late 2025, if inflation stays under control, there’s hope that interest rates may even ease, which would further support M&A by lowering financing costs. For now, dealmakers must structure transactions prudently (e.g., more equity, earn-outs, or seller financing in some cases) to bridge any financing hurdles.

• Valuation and Deal Negotiation Environment: The industrial sector saw a valuation reset after 2021’s highs. Company valuations (measured in EBITDA multiples) for many industrial companies contracted in 2022 with stock market declines and recession fears. Sellers often were slow to adjust expectations, still remembering peak valuations. This led to a bit of a standoff in 2022–early 2023: buyers wanted discounts, sellers wanted yesterday’s price. By 2024, expectations started to align better. Corporate sellers under pressure (e.g., conglomerates needing to sell a division) accepted the new normal pricing, and buyers, seeing economic stability returning, were willing to pay a fair (if not frothy) price. The result: more deals getting done. We also saw an increase in creative deal structures to close valuation gaps – such as earn-outs (where the seller gets a future payment if the business hits targets) and equity rollovers (seller keeps a stake). These techniques were especially common in private equity acquisitions of industrial companies, aligning interests if there’s uncertainty about near-term performance. In public company deals, use of stock as currency increased: several 2024–25 industrial mergers were stock-for-stock or mixed, allowing sellers to share upside and buyers to conserve cash.

• ESG and Regulatory Compliance: Environmental, social, and governance (ESG) considerations are increasingly part of due diligence and deal approval for industrial companies. Regulatory compliance, particularly environmental liabilities, can make or break a deal. For example, companies in chemicals or heavy manufacturing might carry significant environmental cleanup obligations – a buyer will be cautious and might negotiate indemnities or adjust price for that. Likewise, if a target has factories that are heavy emitters of carbon, a buyer will consider future carbon costs or required investments to meet climate regulations. On the positive side, companies with strong ESG profiles (low emissions, good safety records, etc.) might command a premium as both strategic buyers and investors favor “future-proof” operations. Regulators in some countries can also impose conditions related to ESG when approving deals (like requiring commitments to certain environmental standards or workforce practices).

• Labor and Workforce Factors: Industrial M&A often has a labor angle – plant closures or consolidations can trigger political and union pushback. For instance, if two manufacturing companies merge and plan to close a factory, local governments and labor unions may intervene or seek assurances. We saw in some automotive supplier mergers that unions lobbied to protect certain facilities. While this typically doesn’t legally block a deal, it can affect integration plans and costs (companies may promise to retain more staff or provide packages, which factor into deal valuation). In 2023, the U.S. automotive sector experienced major union strikes; any ongoing labor unrest can influence M&A timing (companies might avoid big moves in the middle of labor disputes, or conversely, a company weighed down by labor cost issues might become a takeover target for a turnaround). It’s a reminder that beyond dollars and cents, the human element in industrial companies is significant and scrutinized in M&A.

In sum, the operating environment for industrial M&A in 2025 is one of cautious optimism. Cautious – because regulatory hurdles and economic uncertainties still exist; optimistic – because many of those hurdles are navigable and the fundamental strategic logic for deals is strong. Companies are finding ways to get deals done: being more strategic in what they pursue (to avoid antitrust issues), engaging regulators early, using innovative financing, and structuring terms to manage risk. Advisors are busy ensuring that deals can clear the various checkpoints. The fact that we have seen a resurgence of large deals in late 2024 and 2025 indicates that participants are confident in managing these regulatory and market challenges.

Outlook and Future Expectations

As of Q4 2025, the outlook for Industrials & Manufacturing M&A is positive, with an expectation of accelerating activity into 2026. Industry analysts, deal advisors, and company executives generally foresee an M&A upswing driven by the need for transformation and the availability of strategic opportunities. Here are some key expectations for the near future:

• Continued Rebound in Deal Volume and Value: Barring a major economic downturn, M&A activity in the industrial sector is anticipated to rise further in late 2025 and through 2026. The rebound that took hold in 2024 is set to strengthen as interest rates stabilize and fears of recession abate. Many companies that delayed acquisitions over the past two years are returning to the table. A recent survey (e.g., by EY-Parthenon) found that nearly half of industrial company CEOs intend to actively pursue M&A in the next 12 months – a striking figure given the uncertainties they’ve navigated. There is a robust pipeline of deals in discussion, from large strategic mergers to a plethora of middle-market targets that private equity is evaluating. If inflation and rates trend downward in 2026, it could even spur a frenzy akin to 2021 in certain segments, though likely more focused than that broad boom.

• Portfolio Reshaping to Accelerate: We expect an ongoing stream of divestitures and spin-offs from conglomerates and diversified manufacturers. Companies are under pressure from shareholders to unlock value by separating businesses that don’t fit well together. Each such separation often leads to one or both pieces being involved in M&A. For example, a spun-off division might become an acquisition target once it’s independent. Or the parent, after shedding a unit, might use the proceeds to acquire in its core area. In industrials, where conglomerates still exist (think of businesses like 3M, Honeywell, etc.), we’ll likely see more moves to streamline. The trend is “divide and conquer” – smaller, focused entities that then either become acquirers or attractive targets themselves. From an M&A perspective, this means more deal flow in the form of carve-out sales and subsequent bolt-on acquisitions.

• Tech and Automation Deals Will Remain Hot: Every indication is that technology-driven M&A in manufacturing will intensify. The AI revolution of 2023–2025 is spurring companies to integrate AI into everything – expect manufacturers to acquire AI firms that specialize in things like predictive maintenance, computer vision for quality control, or supply chain optimization. Automation and robotics will also see continued consolidation; the big automation players may snap up smaller innovators (we might see another wave of deals like when Teradyne bought Universal Robots, etc.). Additionally, as industrial companies generate more data (IoT sensors in factories), they will seek to own data analytics providers. All of this suggests that the boundary between “industrial company” and “tech company” keeps blurring, and M&A will both reflect and drive that convergence. The Legacy Advisors’ Technology M&A Report (2025) notes how every industry is buying tech – industrials are a prime example of this cross-sector tech acquisition trend.

• Supply Chain Realignment (Reshoring/Nearshoring) to Drive Deals: The geopolitical climate (U.S.-China decoupling, war in Ukraine, etc.) has pushed companies to reconfigure supply chains for resilience. We anticipate more acquisitions geared towards localizing production. For instance, North American firms might acquire Mexican or Canadian suppliers (taking advantage of USMCA) to shift production closer, or EU firms might acquire Eastern European manufacturers to reduce reliance on Asia. Also, companies might acquire logistics and distribution providers to tighten control over delivery of their products (industrial firms buying warehouses, last-mile providers, etc., though that veers into transportation sector). Governments are also incentivizing local investment – e.g., U.S. CHIPS Act funding for semiconductor fabs or European subsidies for battery plants – which could result in foreign companies buying domestic ones to quickly establish a local footprint that qualifies for government support. Essentially, industrial M&A will align with the new map of global trade, which emphasizes regional blocks and trusted partner networks.

• Consolidation in Fragmented Subsectors: There are many corners of the industrial world that remain highly fragmented – ripe for roll-ups. These include areas like components manufacturing (lots of niche players making one specific part), industrial services and maintenance, specialty construction trades, and packaging. The outlook is for active roll-up strategies by both corporate and PE players. We anticipate mid-sized deals where, for example, two mid-tier pump manufacturers merge to better compete with the top players, or a private equity firm continues to acquire family-owned industrial distributors across states to build a national distributor. With digital marketplaces and e-commerce affecting how B2B sales happen, distributors and service providers may consolidate to invest in the necessary digital infrastructure together. So, expect a steady drumbeat of small-to-medium acquisitions that aggregate market share in these fragmented fields – often these don’t grab headlines individually, but collectively they reshape the competitive landscape.

• Financial Sponsor Activity Remaining Strong: Private equity firms are predicted to remain very active in industrial M&A. They have huge amounts of capital that needs deployment, and industrial assets provide diversification and often stable cash flows. In a period where pure tech investments carry high valuations and volatility, many PE funds are keen on old-economy businesses with modernization potential. We foresee more take-private transactions if public market valuations stay moderate – PE might buy undervalued public industrial companies, improve them (perhaps via bolt-on acquisitions and operational efficiency), then re-list them later. Already there have been some notable take-privates (for instance, several industrial tech companies were taken private in 2020-22 by PE consortia). The conditions in 2025 (reasonable interest rates, lots of dry powder, and sellers open to deals) create fertile ground for sponsor-led M&A. One nuance: sponsors will also likely be sellers in this period, exiting investments they held onto during the slower 2022–23 window. So, secondary buyouts (one PE selling to another) will occur, as well as sponsor-to-strategic sales now that strategics are back in the game with cash.

• Potential Mega-Mergers on the Horizon: While the trend has been towards selective deals, industry experts wouldn’t rule out the return of mega-mergers in industrials if conditions align. For example, speculation continues about whether some of the large aerospace and defense players might combine (e.g., the never-ending Boeing-Airbus speculation – highly unlikely due to antitrust, but perhaps major supplier mergers). In autos, if certain companies struggle with EV transition costs, one might acquire or merge with another (there are occasional rumors around companies like Honda merging with another automaker, or the possibility of a tech giant buying an automaker). Similarly, in industrial manufacturing, if growth is hard to come by, we could see a bold move like two big conglomerates merging divisions or an international merger of equals. These are harder to predict and orchestrate, but the M&A advisors are certainly pitching various transformational combinations behind the scenes. If stock prices remain stable or rise, companies might be more willing to use their equity for such deals. So, one or two surprise large mergers in late 2025 or 2026 is not out of the question.

• Challenges and Wildcards: On the cautionary side, there are some wildcards. A sharp economic downturn or credit crunch would of course slow M&A. Geopolitical crises (beyond current ones) or an escalation with China could freeze cross-border deals overnight. Also, if a major merger in industrials were to result in obvious negative consequences (like big layoffs or price increases for customers), it could provoke a political backlash that makes regulators even tougher, chilling other deals. Companies must also execute the deals well – integration pitfalls (especially in combining different corporate cultures or successfully absorbing tech startups into big organizations) could cause some to think twice about acquisitions if a few high-profile ones flounder. And one cannot forget that some industrial subsectors face secular decline (e.g., oil & gas equipment in a world slowly transitioning to renewables); M&A there might pick up (consolidate to survive) but also faces the question of long-term viability.

Overall, the future of M&A in Industrials & Manufacturing looks bright and busy. The fundamental drivers – need for new technology, need for scale, repositioning for the future economy – are not going away. If anything, competitive pressures in the sector are increasing, and M&A is one of the quickest ways to respond. Corporate leadership teams have regained confidence after navigating the pandemic and inflation shock, and many now view acquisition as essential to their strategy (much like in tech and healthcare, where constant innovation through M&A is the norm). The advisory community (investment banks, consultants) is gearing up for a surge in mandates in the industrial space.

Expect 2026 to possibly outdo 2021’s records in some respects, albeit targeted to where it counts: acquisitions that make industrial companies smarter, greener, and more resilient. As one industry CEO put it in a recent conference, “Standing still is not an option – if you’re an industrial company today, you either buy, sell, or get left behind.” That sentiment captures the proactive dealmaking mindset likely to dominate the industrial sector’s next chapter.

Conclusion

The Industrials & Manufacturing industry continues to be a bedrock of global M&A activity, playing a crucial role in the evolving corporate landscape. While it may not always capture the tech-like buzz, this sector’s M&A volume and impact are enormous – reflecting the constant need for companies that build and move things to adapt and optimize. Our review of the trends through 2025 shows an industry at an inflection point: after weathering economic volatility and recalibrating strategies, industrial companies are now pressing forward with transformative deals. They are strengthening supply chains, embracing advanced technologies, consolidating where it makes sense, and refocusing on what they do best. These moves are not just about cutting costs or getting bigger for its own sake; increasingly, M&A in industrials is about building the capabilities for future success – whether that’s an AI-enabled factory, a secure local supply network, or a streamlined product line that leads its market.

For founders and owners in the industrial sector, the implication is clear. M&A is a key strategy: if you’re a middle-market manufacturing business, the odds of being part of a larger combination or needing to acquire others to stay competitive have never been higher. The landscape is one of “eat or be eaten” in some niches, and “collaborate and grow” in others. Companies should proactively evaluate their portfolios and be ready to seize opportunities – either to acquire that critical piece that will future-proof the business or to consider a sale or merger if that will create more value and resilience. As seen in other industries like technology and healthcare (see Legacy Advisors’ reports on those sectors for parallels), those who use M&A smartly tend to emerge as winners. The industrial sector, long known for steady incrementalism, is now increasingly dynamic and deal-driven.

In conclusion, Industrials & Manufacturing M&A in 2025 is characterized by renewal and strategic purpose. The sector is aligning itself with the demands of a new era – one that values agility, innovation, and reliability. Deals are being crafted to ensure manufacturers can deliver in a world of AI, electrification, and geopolitical complexity. While challenges like regulation and integration remain, they are surmountable with careful planning and execution. The overall sentiment in the market is optimistic: the industrial economy is picking up steam, and with it, the engines of M&A are humming. As we head into 2026, expect the industrial deal machine to run in high gear – forging the next generation of industrial leaders through bold combinations and timely acquisitions. In the industrial world, as on the factory floor, the gears of progress never stop turning, and M&A is now firmly part of that mechanism driving the industry forward.

Resources

• Legacy Advisors – 2025 Healthcare & Life Sciences M&A Industry Report (LegacyAdvisors.io)

• Legacy Advisors – 2025 Financial Services M&A Industry Report (LegacyAdvisors.io)

• Legacy Advisors – 2025 Consumer Products & Retail M&A Industry Report (LegacyAdvisors.io)

• Legacy Advisors – Technology M&A Report: Trends, Drivers, and Outlook for Tech Founders (2025) (LegacyAdvisors.io)

• PwC – Industrial Manufacturing: US Deals 2025 Midyear Outlook (June 2025)

• PwC – Global M&A Trends in Industrials and Services: 2025 Mid-Year Outlook (June 2025)

• KPMG – Q2 2025 Industrial Manufacturing M&A Trends Report (Aug 2025)

• EY-Parthenon – Turning Risks into Advantages: M&A as a Growth Engine for Industrials (July 2025)

• EdgePoint Capital – Manufacturing Trends Fueling M&A in 2025 (July 2025)

• Bain & Company – M&A in Automotive and Mobility: 2024 Report (Feb 2024)

• Select M&A deal press releases and news: Boeing/Thoma Bravo (2025), BAE/Ball Aerospace (2023), L3Harris/Aerojet (2023), Emerson/NI (2023), Parker/Meggitt (2022), CP/KCS (2021), etc.