2025 Mid-Year Industrials M&A Outlook

The industrials sector has reached a pivotal moment, shaped by geopolitical uncertainty, evolving trade policies and rapid technological advancement. As companies navigate this dynamic environment, strategic investments in innovation, infrastructure and domestic capabilities are emerging as key drivers of resilience and long-term growth.

Navigating Volatility with Innovation and Service

• Geopolitical tension driving market volatility. Ongoing trade policy negotiations continue to weigh on the industrial sector’s outlook. In response to heightened geopolitical complexity, forward-looking industrial companies are reassessing their business strategies, accelerating the adoption of advanced technologies and prioritizing strategic initiatives aimed at enhancing resilience and driving sustainable long-term growth.
• Strengthening through service. Industrial companies that have strategically expanded their service portfolios are seeing tangible benefits, including enhanced operational resilience and improved customer retention. Shifting from transactional engagements toward recurring service relationships not only strengthens competitive advantages but also provides a buffer against economic volatility — positioning these businesses favorably for future M&A opportunities.

Industrial Evolution: Powering Progress Through Technology and Infrastructure

• Fueling growth:  Energy and infrastructure in the artificial intelligence era. As artificial intelligence continues to advance, data centers have emerged as critical infrastructure. The growing demand for substantial energy resources to support advanced computing and data-intensive operations is driving a surge of investment in grid infrastructure, electrical components and adjacent services and markets. Similarly, there has been an uptick in M&A interest to gain exposure in infrastructure and energy-related assets to sustain industry growth and meet escalating power requirements.
• Rebuilding the industrial base through innovation.Technological innovation is reshaping the manufacturing landscape, driving the return of advanced production capabilities to the United States — particularly in sectors focused on sophisticated, high-value products and precision manufacturing. At the same time, the widespread adoption of automation and AI/machine learning solutions across industries is creating significant opportunities for providers of these technologies, benefiting stakeholders throughout the value chain.

Domestic Industry and Supply Chain Realignment

• Reconfiguring supply chains — domestic resurgence amid global disruption. In response to rising production costs across multiple markets, ongoing geopolitical instability and continued vulnerabilities in global supply chains, many industrial companies are pursuing nearshoring and onshoring strategies to bring manufacturing closer to domestic markets. Certain manufacturing operations are returning to the U.S., driven by technological advancements and compliance requirements tied to government mandates.
• Reinforcing domestic industry: The impact of Build America Buy America Act (BABA) and trade policy. The current administration continues to emphasize support for U.S.-based businesses, reinforcing the principles of the BABA Act. As a result, both domestic and international companies with global supply chains are increasingly seeking to strengthen their U.S. footprint. This shift is driven by a desire to mitigate tariff exposure, reduce geopolitical risk and meet eligibility requirements for government mandates — ultimately fueling additional investment in domestic manufacturing and infrastructure.