June 24, 2025 Industrial Manufacturing US Deals 2025 Midyear Outlook

Recalibrating for impact: Strategic M&A amid market realignment.

Industrial manufacturing M&A in the first half of 2025 signals a recalibration of capital allocation in response to shifting macro conditions. Deal volume moderated amid new US tariffs, geopolitical volatility and selective private equity (PE) engagement. Yet, investors are pursuing high-conviction opportunities aligned with long-term structural trends. Strategic buyers and sponsors are doubling down on automation, defense and energy transition — sectors where innovation, policy support and resilience to cyclicality are driving premium valuations and sustained interest.

Key developments include:

• Tariff-induced valuation gaps: Newly implemented US tariffs introduced friction into cross- border dealmaking, stalling transactions with international exposure and widening bid-ask spreads.
• Strategic divestitures accelerate: Corporations are intensifying portfolio optimization efforts, shedding non-core assets to refocus on high-growth areas. Notably, several industrial conglomerates announced spin-offs in the advanced materials segment.
• Tech-driven acquisitions: Demand for automation, AI and digital transformation capabilities continues to drive acquisitions aimed at enhancing productivity and operational agility.
• Supply chain reconfiguration: Heightened geopolitical and trade risks are prompting companies to reevaluate supply chain dependencies. This is fueling interest in domestic and nearshore M&A as part of broader resilience strategies.
• PE’s selective deployment: While overall PE activity slowed, firms remain active in resilient sectors — particularly technology and business services — where tariff exposure is limited and long-term value creation remains viable.

76% of deal value in the first quarter of 2025 came from transactions over $1 billion, compared to 53% in 2024. This reflects buyers’ focus on transformative investments tied to technology advancement and supply chain realignment.

Source: Copyright © 2025, S&P Global Market Intelligence (and its affiliates, as applicable)*

Looking ahead: Navigating uncertainty with strategic focus

As we enter the second half of 2025, dealmakers must remain agile in a market shaped by both volatility and long-term opportunity. Key strategic considerations include:

• Staying ahead of policy shifts: Ongoing trade negotiations and potential regulatory changes could materially affect cross-border deal flows. Proactive monitoring and scenario planning will be essential to maintain deal momentum.
• Reinforcing due diligence discipline: In a complex geopolitical and economic environment, thorough due diligence remains critical to assess risk, validate value creation potential and enable strategic alignment.
• Harnessing technology for competitive advantage: Automation, AI and digital tools are increasingly central to industrial competitiveness. M&A and internal investment targeting these capabilities should be a strategic priority.
• Targeting high-growth, policy-backed sectors: Government-backed initiatives in defense and infrastructure continue to support robust deal pipelines. Strategic acquirers should explore opportunities where public funding and private innovation intersect.
• Reshaping supply chains through M&A: As companies adapt to geopolitical risks and cost pressures, acquisitions of nearshore or domestic suppliers can enhance supply chain resilience and agility.

“The future belongs to those who invest boldly — whether in innovation, resilience or strategic reinvention — to not only navigate disruption but define the next era of industrial growth.”

— Michelle Ritchie, Industrial Products Deals Leader

The bottom line

Despite ongoing macroeconomic and geopolitical challenges, industrial manufacturing M&A remains active, fueled by innovation, rising defense spending and supply chain restructuring. Companies are targeting acquisitions that enhance digital capabilities, operational resilience and proximity to key markets. Strategic buyers and investors who stay agile and focused on long-term value creation will be best positioned to capitalize on these shifts. The remainder of 2025 offers meaningful opportunities to reshape portfolios and drive competitive advantage through transformation-focused dealmaking.

Subscribe to Industry Today