Dive Brief:
- Industrial mergers and acquisitions have “hit a transformative phase,” according to a new PwC report, with deal values reaching a record $173 billion over the past year. That’s up 28% from PwC’s FY 2025, which ran from from July 1 to June 30.
- Transactions above $5 billion now make up 56% of deal value, an increase of 18% over FY 2024, the report said. At the same time, the average deal size excluding these “mega-deals” grew 31% from FY 2024.
- Several sectors are attracting the highest valuations, including power equipment, thermal management, automation and controls and advanced components, PwC said.
Dive Insight:
The PwC report follows a KPMG report showing that the number of high-value mergers and acquisitions steadily increased throughout last year as well, with 2025 seeing the most industrial M&A deals over $500 million since 2021.
According to the PwC report, industrial manufacturing accounted for 155 convergence deals, meaning those that focused on the same industrial supply base consisting of power equipment, thermal management, automation and controls and advanced components. Industrial manufacturing also accounted for $532 billion worth of transactions from 2021 to 2025, which exceeded all other industrial subsectors, the report said.
“Large transactions continue to dominate because buyers are increasingly pursuing transformative capabilities rather than incremental growth,” Michael Fiore, U.S. industrial products M&A leader at PwC, said in an emailed statement. “Capital is flowing toward assets tied to AI infrastructure, grid modernization, defense, resiliency and electrification, creating intense competition for a relatively limited pool of strategically important assets.”
In addition, rather than suppressing merger and acquisition activity, PwC said tariffs and geopolitical uncertainty are accelerating it.
In particular, cross-border deals have increased substantially over the past several years, driven by reconfigured global supply chains and substantial reshoring investments. Deals targeting the U.S. nearly doubled in FY 2025 to $72 billion.
Fiore said these factors are also “driving companies to rethink and reconfigure their supply chains.”
“Some buyers are pursuing domestic manufacturing assets to improve resiliency and reduce exposure to disruption, while others are acquiring strategic assets abroad to strengthen supply-chain access, expand regional capabilities or secure critical technologies,” he said.
When it comes to AI, manufacturing adoption has been uneven, due in part to a lack of frontline leadership at some companies. The cost and effectiveness of the technology have also discouraged some manufacturers from incorporating it into their production workflows.
However, PwC said the technology is still having in an impact on M&A activity. That trend is set to continue, Fiore said.
“AI adoption is likely to accelerate as manufacturers move beyond experimentation and focus on measurable business outcomes,” he said. “Investors and management teams are increasingly looking for evidence that AI can improve productivity, offset labor costs, increase throughput and enhance predictive maintenance capabilities.”
Going forward, “Manufacturers should pay close attention to the areas attracting the strongest investor and buyer interest, including AI infrastructure, electrification, grid modernization, automation, advanced components and defense-related capabilities,” Fiore said. “Companies that can clearly demonstrate how technology investments translate into operational and financial performance are likely to be better positioned in the market.”
