What’s driving industrial manufacturing’s M&A surge?
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Industrial manufacturing dealmaking has entered a new phase, shaped less by traditional consolidation and more by a race for capability, infrastructure exposure and operational resilience.
According to PwC’s latest industrial manufacturing deals outlook, industrial manufacturing M&A reached $173 billion over the past year, rising from $135 billion in FY25. Transactions valued above $5 billion accounted for 56% of total deal value, compared with 18% in FY24, highlighting the growing influence of large strategic transactions.
The increase comes despite continued uncertainty around interest rates, trade policy and geopolitical tensions. Rather than slowing activity, those challenges are encouraging many manufacturers to pursue acquisitions that strengthen their competitive position and accelerate growth plans.
Manufacturers are buying capability rather than capacity
The current M&A cycle differs from previous periods of industrial consolidation. Scale remains important, but buyers are increasingly targeting businesses that provide specialist capabilities in automation, controls, power equipment, thermal management and advanced manufacturing technologies.
PwC reports that average deal size, excluding mega-deals, increased 31% from FY24 to $169 million. Average deal size across all transactions rose from $155 million in FY24 to $375 million in the latest reporting period.
The trend suggests manufacturers are placing a premium on assets that help them move faster. Building capabilities internally often requires years of investment and development. Acquisitions can provide immediate access to engineering expertise, intellectual property, customer relationships and production capacity.
For manufacturers dealing with labor shortages, aging infrastructure and changing customer expectations, speed has become a significant competitive advantage. Companies that can quickly add automation technologies, digital capabilities or energy-related manufacturing expertise may be better positioned to respond to market shifts and emerging opportunities.
AI infrastructure is creating new industrial opportunities
Artificial intelligence is creating demand far beyond software and computing platforms. The infrastructure supporting AI growth is generating opportunities throughout the industrial manufacturing sector.
The rapid expansion of data centers and advanced computing facilities is increasing demand for electrical equipment, cooling systems, automation hardware and precision-engineered components. PwC identifies AI infrastructure, grid modernization and defense resilience as three of the most significant drivers behind current industrial manufacturing deal activity.
This convergence is directing investor attention toward manufacturers serving multiple growth markets simultaneously. Companies supplying thermal management systems, electrical components or specialized industrial equipment may benefit from exposure to data center expansion, electrification projects and defense spending.
The growing focus on AI is also changing acquisition criteria. Investors increasingly want evidence that AI can improve productivity, reduce operating costs and support measurable financial performance. Businesses that can demonstrate operational improvements through automation and data-driven decision-making may attract stronger interest from potential buyers.
Operational performance metrics are becoming more important during due diligence. Buyers are evaluating whether manufacturing systems, production processes and technology investments can deliver sustainable improvements in efficiency and profitability.
Strategic buyers are driving the market
Strategic acquirers remain the dominant force in industrial manufacturing M&A. PwC reports that strategic buyers accounted for 86% of deal value over the past 12 months, representing the highest concentration recorded.
These buyers often have a clear understanding of how an acquisition fits within a broader industrial strategy. They may be willing to pay premium valuations when a target strengthens an existing platform, expands technical capabilities or improves access to attractive end markets.
Private equity firms continue to participate actively in the sector but have become more selective. Financial buyers remain interested in areas such as test and measurement, flow control, filtration and thermal management. Strategic acquirers, however, are responsible for most of the largest transactions.
Corporate divestitures are also contributing to deal activity. Large industrial groups continue to streamline portfolios by selling non-core operations. These carve-outs frequently provide attractive opportunities for buyers seeking established manufacturing assets, customer relationships and experienced technical teams.
Under focused ownership, many of these businesses may have greater potential for investment and long-term growth.
M&A is becoming a tool for resilience
Industrial manufacturers are no longer waiting for economic conditions to become more predictable before making strategic decisions. Many are using acquisitions to address uncertainty directly.
PwC reports that cross-border deal value represented 56% of total activity over the past 12 months, up from 30% in FY22. US-targeted deal value nearly doubled in FY25 to $72 billion, supported by supply chain restructuring and reshoring initiatives.
These figures suggest manufacturers are increasingly using acquisitions to strengthen regional supply chains, improve market access and reduce exposure to geopolitical risks. While tariffs and trade policy remain concerns, they are also encouraging companies to secure local production capabilities and supplier networks.
The result is a more focused and strategic M&A environment. Manufacturers are pursuing acquisitions that address multiple priorities simultaneously, including technology adoption, infrastructure exposure, supply chain security and access to high-growth markets.
Industrial manufacturing leaders increasingly view acquisitions as a means of accelerating transformation rather than simply expanding scale. As investment continues to flow toward AI infrastructure, electrification, defense and supply chain resilience, M&A is likely to remain a central component of industrial growth strategies in the years ahead.
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