Industrials M&A accelerates toward 2027

December 2026  |  FEATURE | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

December 2026 Issue

Against a backdrop of macroeconomic volatility and geopolitical uncertainty, M&A activity has been uneven across regions in recent years, with many sectors experiencing weaker confidence and softer valuations.

One sector bucking this trend, however, is industrials, particularly in Europe.

As companies invest in artificial intelligence (AI) infrastructure, supply chain reshoring and factory automation, dealmakers are increasingly focused on portfolio reshaping, with capital flowing toward assets that offer sustainable growth, productivity gains and strategic value.

Much of this activity is being driven by mega deals. According to AlixPartners, global industrials deal value reached £150bn in Q2 2026 as dealmakers focused on fewer, larger transactions. While deal volumes edged down by 3 percent, deal value surged by 71 percent quarter on quarter. EMEA accounted for 45 percent of total deal value.

Among the quarter’s headline deals were Finnish firm KONE’s £25.9bn acquisition of TK Elevator, Bain Capital’s £6.3bn carve out of Volkswagen’s marine engine business Everllence, and Parker Hannifin’s £1.9bn acquisition of CIRCOR Aerospace.

“We have seen strong momentum for high-quality opportunities of all sizes,” says Mark Brune, a managing director at Harris Williams. “Strategic buyers have been especially active in industrials transactions so far this year. In our own pipeline, strategics have been active in approximately three quarters of our industrials engagements.”

Primary opportunity drivers

Attracting sustained interest from corporate buyers and private equity (PE) firms, the industrials sector remains a major driver of deal value in an otherwise uneven European M&A market. Companies serving resilient end markets such as energy and infrastructure, or operating in specialised high-value niches, continue to draw strong attention from investors.

“Quality continues to be a top factor, with buyers gravitating toward companies with recurring demand, defensible market positions and differentiated offerings tailored to high-growth end markets,” attests Mr Brune. “The relative scarcity of companies meeting that bar in the market is driving intense competition for the best of the best.”

Datasite, in its report ‘Market Spotlight: Industrials M&A powers ahead as AI and geopolitics reshape Europe’, identifies three principal drivers of current industrials M&A activity.

The first is automation and AI. M&A has become an important strategic tool for industrial companies seeking to accelerate technology adoption and embed automation and AI throughout their operations. Businesses are positioning themselves to benefit from anticipated growth in physical AI and robotics. AI is also influencing dealmaking more fundamentally, driving investment in the infrastructure required to generate and transmit the energy needed to support growing computing demand.

“Investors have also sharpened their focus on heavy assets, low obsolescence (HALO) businesses,” adds Mr Brune. “Many serve the AI and data centre build-out directly, while others are simply insulated from digital substitution by the nature of what they make. Alongside those trends, global supply chain shifts, electrification, infrastructure investment and digital transformation continue to support investor interest across a range of industrials segments.”

The second driver is geopolitics. M&A activity across the European industrials sector has been influenced by shifting geopolitical and macroeconomic conditions. The chemicals sector, for example, has faced a range of pressures, including elevated energy costs, competition from low-cost Chinese imports and softer global demand. At the same time, the war in Ukraine, tensions in the Middle East and evolving US defence policy have encouraged investment in strategically important industries.

The third driver is defensive dealmaking. Higher interest rates, elevated energy costs and subdued domestic demand have prompted an increase in corporate carve outs and turnaround transactions. Across Europe, industrial companies are refining portfolios, reducing excess capacity and focusing on stronger business lines. While technology investment and strategic policy objectives continue to support growth-oriented transactions, cost pressures and economic uncertainty are likely to sustain defensive dealmaking as well.

“Strategic acquirers are seeking opportunities to expand into new geographies, gain value-added capabilities, or enter adjacent product verticals,” points out Mr Brune. “They are competing aggressively for businesses serving higher-growth, cycle resilient end markets or holding significant intellectual property.”

2027 and beyond

Heading into 2027, the industrials sector appears well positioned for continued M&A activity. From onshoring and electrification to infrastructure investment and digital transformation, investors remain focused on a broad range of mission-critical industrial businesses.

“A backlog of mature PE-owned assets, many held for five years or more, creates a structural impetus for exits, and clearer visibility on future earnings as tariff-driven volatility abates and gives potential sellers more confidence,” foresees Mr Brune. “In building products, for example, we are already seeing a more dynamic landscape, underpinned by continued strategic buyer activity and a measured return of financial sponsors.

“In particular, we would expect continued interest in HALO businesses,” he continues. “These companies benefit from the AI investment cycle in two ways – as suppliers of the specialised infrastructure required to build data centres and as investment opportunities resistant to AI disruption. Heading toward 2027, industrials remains one of Europe’s most active deal sectors and where investors are looking to focus.”

Amid shifting priorities and fresh competitive pressures, industrial leaders face a defining period for growth and reinvention.

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BY

Fraser Tennant