Dive Brief:
- 2025 saw the most industrial M&A deals over $500 million since 2021, including a surge toward the end of the year, according to KPMG data shared with Manufacturing Dive.
- The number of mergers and acquisitions valued at more than $500 million in the United States increased from 37 in the first quarter of 2025 to 61 in Q4, the highest since Q4 2021 with 76 such deals.
- The total number of industrial deals declined 10.9% quarter-over-quarter to 1,951 in Q3, while the total value increased $133.9% to $217.4 billion, the company reported separately.
Dive Insight:
Disruption in the electric vehicle market and pivots in the defense industry helped drive the increase in high-value deals, Todd Dubner, a principal in KPMG’s Global Strategy Group, said in an email.
Dubner said that many manufacturers are scaling down their exposure to electric vehicles and/or expanding into adjacent areas like energy. These moves are due largely to changes in consumer demand for EVs.
In addition, major defense firms that historically have made “exquisite” products like aircraft carriers have had to “pivot the way they think about these systems to get to higher-volume manufacturing environments [and] produce thousands or hundreds of thousands of units” like drones, he said.
It is difficult to manufacture major weapon systems while also competing with smaller firms to make less complex systems, Dubner noted. “Companies tend not to operate in both modes simultaneously,” he said. “Sometimes M&A is easier than doing it yourself.”
According to the report, strategic deals in Q3 accounted for 51% of 2025 deal volume and 69% of value, with a 3.7% drop in volume QoQ and a 211.9% increase in value QoQ. In the private equity space, deals saw a 17.4% drop in volume QoQ and a 50.2% increase in value QoQ.
This disparity indicates the market is pivoting toward fewer, higher-value transactions, with strategic buyers and private equity firms targeting scalable platforms and future-proof capabilities, the report said.
The increase in higher-value deals “shows the converging value expectations as sellers grow accustomed to our growth and interest rate environment and buyers gain more confidence in the forecastability of revenue and profit,” Dubner said in the report. “Sellers are being rewarded for focusing transactions and buyers are finding the market for good assets to be highly competed.”
The report said that by far the most valuable deal in Q3 2025 was Union Pacific’s acquisition of Norfolk Southern for $85 billion. The four largest transactions after that were much smaller at $3.5 billion to $28.2 billion.
Looking ahead to 2026, Dubner said via email that “the appetite for deal-doing is high,” and he expects to continue seeing more large deals and fewer smaller ones.
“Smaller businesses are having a little tougher time right now than big businesses,” he said. “The competitive landscape changed due to tariffs, changes in consumer behavior, etc., and big companies have been able to navigate those changes better than smaller companies. Where you sit in the value hierarchy has a lot to do with how you navigate these changes and who bears the burden.”
Although tariffs affected deal timing and certainty early in 2025, deal volume began to increase later in the year and into 2026 because of that initial delay. Decreasing interest rates also played a role in the H2 surge.
