Global M&A trends in industrials and services: 2025

The M&A outlook for industrials and services (I&S) in 2025 is a story of growth, with deals activity likely to stem both from successful companies looking to boost growth and from struggling ones looking for solutions.

One overarching theme is that companies are focusing on acquisitions and investments in energy transition and services related to it. They are also acquiring new technologies and digital capabilities to stay competitive and expand market presence, with a particular emphasis on AI, automation and digital transformation—a key focus for companies across I&S subsectors. M&A activity will nonetheless play out differently by subsector, as follows:

Business services deal activity is expected to increase significantly because this sector provides sought-after services that provide stable, steady cash flow, as well as consolidation opportunities.
Deal activity in aerospace and defence (A&D) is increasing as the tourism market grows and defence budgets expand in response to global conflicts.
The engineering and construction (E&C) and industrial manufacturing subsectors expect stable to increased deal activity driven by energy transition and related services, as well as a push to maximise efficiency through adoption and deployment of technologies including automation, robotics and AI.
The automotive subsector is also expecting deal activity to increase, although this will be driven by capacity rationalisation and restructuring by both original equipment manufacturers (OEMs) and suppliers. Deal activity focused on the electric vehicle (EV) market will continue, especially with respect to the services and infrastructure surrounding such vehicles, but in a focused and targeted manner given slowing trends.

CEOs are more confident about the M&A outlook than they have been over the past few years. M&A is an attractive option as they actively review portfolios and consider carve-outs and divestitures that would enable them to focus on core strategic growth areas, profitability and capital allocation. Companies are taking action to divest non-core or underperforming assets and reallocate capital resources to more profitable or growth-oriented areas. Following GE’s split into three public companies in 2024, and amid a broader trend toward spin-offs, we see a strong likelihood that other significant conglomerate break-ups in I&S will be announced in 2025.

81%

of I&S CEOs who made a significant acquisition in the last three years plan to make one or more acquisitions in the next three years.

^{Source: PwC’s 28th Annual Global CEO Survey, January 2025}

The percentage of I&S CEOs planning to make an acquisition is marginally up from 79% last year, according to our latest CEO survey. Now that the big global election year of 2024 is behind us and inflationary pressures are easing, we expect deal activity to pick up in the near term.

Across the globe, there is a rising tone of protectionism in dealmaking and strategic alignment. Companies face the prospect of new tariffs and risk management issues in the supply chain—which already have led some companies to limit the geographic reach of their supply chains or nearshore some operations.

84%

of I&S CEOs say that they will have at least some exposure to geopolitical conflict, including trade disputes and interstate violence, with 25% saying they are highly or extremely exposed to conflict.

^{Source: PwC’s 28th Annual Global CEO Survey, January 2025}

This geopolitical environment is leading dealmakers to focus on domestic M&A opportunities and may limit global expansion and international deal activity. The picture varies by region. In the United States, optimism is strong in part because of the decline in interest rates at the end of 2024 (although the trend is expected to slow in 2025) and easing inflationary pressure, both of which are creating more favourable economic conditions for M&A. Shifts in US regulatory and antitrust policies are expected to influence a greater number of larger, transformative deals, particularly in A&D and industrial manufacturing. In some European and Asian markets, uncertainty about growth, inflation and interest rate expectations persists. This is affecting buyer confidence and sustaining the valuation gap between buyers and sellers. Alternative financing (such as private capital) and structuring approaches (such as earnouts, partnerships and joint ventures) are being used more often to address risk, financing and valuation concerns.

Private equity (PE) is expected to play a role in increasing M&A activity, with substantial ‘dry powder’ ready to be deployed as financing difficulties ease. Examples of where PE is becoming more active include the construction sector, where small to medium-sized companies affected by macro- and microeconomic conditions are being consolidated, and automotive suppliers, where ‘roll-up’ consolidation opportunities exist in the current difficult market. Consolidations such as these create opportunities for a PE platform to align M&A opportunities with strategic objectives and leverage scale, leading to value creation and sustained outcomes.

‘I&S deal activity is coming back in 2025 with a roar, driven by improved macroeconomic conditions; the energy transition; roll-up and exit strategies; large, transformational approaches; and restructuring and realignment mandates—all through a global and domestic risk lens.’

Michelle Ritchie,Global Industrials and Services Deals Leader, PwC US

M&A volumes and values in 2024

Deal volumes and values in industrials and services decreased by 15% and 3%, respectively, between 2023 and 2024 but remain at approximately pre-pandemic levels. The continued decrease in M&A activity is attributable to the macroeconomic and geopolitical environment, which continues to present challenges for dealmakers.

Regional performance varied, with deal volumes down 19% in Europe, the Middle East and Africa (EMEA); 17% in the Americas; and 9% in Asia Pacific. In Asia Pacific, India had an increase in deal volumes of 9%, and in China, although deal volumes decreased by 10%, there are indications that deals activity may be stabilising following three years of decreasing deal volumes. Deal values told a different story, with the Americas up 27% and with EMEA and Asia Pacific down by 20% and 17%, respectively. The regional variation was primarily because of megadeal (deals greater than $5bn) activity, with the Americas having six megadeals in 2024 compared with four in 2023.

Performance also varied across sectors. Deal volumes decreased between 2023 and 2024 across all sectors but to a different extent: aerospace and defence (A&D) by -35%; automotive by –18%; the usually more resilient business services sector by –18%; industrial manufacturing by –14% and engineering and construction by –8%. Deal values decreased in three sectors (automotive, business services and industrial manufacturing) and increased in two (A&D and engineering and construction) over the same period.

In the sector spotlights below, we outline the trends we expect to drive M&A activity in A&D, automotive, business services, engineering and construction, and industrial manufacturing in 2025.

Sector M&A trends in industrials and services

Deal activity in aerospace and defence (A&D) is expected to increase in 2025. M&A will likely focus on small to mid-size acquisitions rather than larger deals as companies shore up supply chains to meet incoming demand and divest non-core assets to focus on commercial aviation and government contracts. We expect M&A activity to support growth in vital A&D segments such as ammunition and defence.
In 2024, interest rates and supply chain issues slowed M&A activity in the sector. However, we see companies taking action to overcome these challenges by divesting non-core assets to strengthen balance sheets and invest in supply chains. For example, Lockheed Martin divested its Canadian Commercial Engine Solutions to FTAI Aviation in September 2024 for $170m. The stage is set for a boost in M&A activity in 2025.
The geopolitical climate, including the war in Ukraine and conflicts in the Middle East, is driving increased defence spending. This is further influenced by potential policy changes under new administrations. There is a significant focus on munitions investment and building a fit-for-purpose munitions industry. Additionally, there continues to be interest in acquiring raw material suppliers to integrate into the defence supply chain, minimising the risk profile and potential availability issues.
The commercial aerospace sector is likely to continue growing in 2025, driving increased M&A activity. Companies are focusing on core aviation operations and selling off non-core operations. Aerospace companies have robust order backlogs and are seeing strong demand. We expect companies will look to ramp up production into 2025.
Both the aerospace and defence subsectors should benefit from increased government and commercial spending stemming from growing post-pandemic travel, and heightened geopolitical tensions, which will drive M&A activity in 2025. PE buyouts and investments in the A&D market are expected to continue, building on activity such as the April 2024 move by Arcline Investment Management LP to take private aerospace parts maker Kaman Corporation in a $1.8bn transaction.

Automotive deal activity is anticipated to increase in 2025, with dealmakers likely to be highly attentive to policy directions in light of recent global election results and tariff considerations. Despite improved macroeconomic trends, automotive businesses are facing challenges from production overcapacity, margin compression and lower consumer demand, all of which are expected to drive an increase in M&A activity. In the US, demand for internal combustion engine (ICE) assets remains robust. Adoption of hybrid and electric vehicles has been slower in the US than in European and Asian markets.
One driver of growth in deal activity is rightsizing of operations through divestitures. OEMs and their suppliers are reviewing current capacity and aligning needs and excesses with future projections of demand. Companies are carving out and divesting assets and making strategic acquisitions to manage margins. Manufacturers are considering scaling back their global footprints through divestitures or by closing operations in less profitable regions to maximise margins. For example, in December 2024, General Motors announced its Chinese joint venture would take certain restructuring actions to address market challenges and competitive conditions. The restructuring is expected to involve plant closures and portfolio optimisation actions.
Manufacturers are experiencing shrinking economies of scale as vehicle models reach the end of their life cycles. Consequently, they must invest in refreshing ICE assets and introducing new hybrid or EV assets to remain competitive. Automotive companies must prioritise digital advancements, software innovation and the development of electrification technologies to sustain their competitive edge. These strategic focus areas will drive acquisitions and deal activity because time to market is faster under a buy versus build strategy.
Deal activity is also coming from consolidation or exit efforts from suppliers as well as investment from PE funds looking for a roll-up strategy to leverage scale. Suppliers are looking to improve tight margins, primarily through scale from acquisitions—or through exit of a division if scale isn’t achievable. OEMs are also considering supplier consolidation to manage supply chain risk and costs. For example, in December 2024, Italian automotive parts supplier Proma Group acquired the assets of Recaro Automotive Germany and signed a licensing agreement for the use of the Recaro brand in the automotive sector.
Strategic alliances, particularly in areas such as battery manufacturing and giga-factories, will continue to be pivotal in 2025. Potential buyers are adopting strategic approaches, seeking to leverage synergies. For example, in November 2024, Volkswagen and Rivian announced a joint venture with a total deal size of up to $5.8bn to focus on the development of software and next-generation electrical architecture for both companies’ future EVs. Through the joint venture, the two companies plan to reduce development costs and scale new technologies more quickly.
Overall, automotive deal volumes are expected to grow as the market adapts to consumer sentiment about ICEs and EV adoption. This adaptation includes leveraging partnerships for development and manufacturing, divesting distressed assets and refining global footprints. The ongoing evolution in the automotive sector underscores the importance of strategic planning and adaptability to emerging trends and market conditions. Companies that take advantage of strategic acquisitions and divest non-core businesses will be best positioned to remain competitive in this challenging market.

Business services deal activity is expected to be robust in 2025 in response to demand for specialists who can help companies navigate the current volatile and complex business environment—from climate change and technology to geopolitics. As businesses expand globally, they lean on these professional services firms to understand the local business environment and help them navigate compliance requirements. In addition to specialists and consultants, other segments attracting significant investor interest include:
- Niche knowledge service companies with stable and steady cash flows
- Testing, inspection and certification companies with strong market growth prospects operating in highly fragmented landscapes that appear ripe for consolidation
- Managed service firms, from cybersecurity to support services, that can demonstrate long-term customer retention
Private equity firms will play a key role in driving business services M&A activity because of the sector’s growth prospects. Of particular interest to PE funds are investments in professional services firms such as IT, accounting, legal and administrative services, which offer stable and recurring cash flows coupled with low asset intensity. Competition for assets within this sector has increased significantly, with several PE funds active in the subsector. By rolling up or merging small or mid-size firms, PE funds can create a larger platform, which allows them to realise economies of scale in areas such as technology adoption, compliance and training costs. The increased scale can also lead to accelerated growth by giving them access to new markets. Examples of PE investments in professional services firms include New Mountain Capital’s May 2024 acquisition of a stake in Grant Thornton’s US business and the June 2024 strategic investment by Hellman & Friedman and Valeas Capital Partners in Baker Tilly US. In the UK, this trend has been going on for some time. In November 2024 Cinven announced it was making a majority investment in Grant Thornton UK and in December 2024 Lee Equity announced its investment partnership with UK-based accounting and business advisory services firm Cooper Parry. These recent transactions reflect the continued growing interest of private equity in professional services. There are also large corporate players in the market seeking long-term investments and purchasing emerging companies for new capabilities and consolidation.
IT services, including cybersecurity and managed services providers, gained attention over the past few years because of their high growth potential. During the pandemic, many companies invested in IT advances such as cloud services, cybersecurity and digital transformation to increase efficiency and adapt to new ways of working. During the implementation stages, these tend to result in heavy investment and lower profitability. However, post-implementation, the IT services subsector is gaining momentum and is expected to grow, with investors drawn to its stable and recurring revenue streams, established customer relationships and scalability.
The rise of AI, the integration of data processing and the availability of extensive data are among the trends advancing the business services sector. Professional services firms are focused on upskilling their workforces to be better able to transform data into unique outputs that cannot be replicated, ultimately making businesses more attractive to potential buyers. Technology and AI are playing an important role in consulting, as data analytics and data transformation tools are necessary to cater to the unique needs of each business.
The human capital management subsector, including recruitment and staffing firms, experienced a decrease in demand because of slower hiring trends. Business processing outsourcing companies are also experiencing a decline in demand. In the UK, the government scaled back significantly on outsourcing services as part of its new budget’s cost-cutting measures. In the US, decreased demand for outsourcing is anticipated with the new administration’s focus on reducing government spending. In many regions, the decrease in demand for recruiting firms and outsourcing may be offset by continuous interest in training services to upskill current employees and overcome skill shortages.
Overall, business services deal volume will increase in the near to medium term, driven by middle-market firms offering unique services deemed necessary to navigate the evolving business environment and compliance requirements, as well the opportunity for scalability and roll-up strategies.

E&C deal activity is expected to grow in 2025. Deal volume is likely to be affected as companies assess where to allocate capital following elections in many countries, particularly given the anticipated regulatory policies and investment as well as the overall business landscape. The impact from 2024 interest rate reductions may spur investment, particularly in the residential real estate construction space. Growth and development of non-residential construction centres around niche markets, such as education and healthcare. The energy transition, grid modernisation, power infrastructure and wastewater will continue to be areas of focus within the industry. As macro influences, including inflationary pressures, continue to ease, 2025 will provide an opportunity for players within the E&C sector to create value through acquisitions and divestitures.
Commercial, or non-residential, construction continues to face a difficult market with stagnant projects, squeezed profit margins, impending refinancing deadlines and the potential risk of debt defaults. Within the office segment, the shift in work trends since the pandemic has created excess capacity in the marketplace. Whereas newer office buildings are more successful at attracting tenants, owners of older buildings are finding that their spaces require renovations and updates or need to be converted for alternative uses (such as health clubs) for occupancy. Data centre construction, including the related energy infrastructure and supporting services, remains one of the bright spots in this challenging subsector. Investment in energy transition, batteries and supporting services for data centres continues to increase—given the steady cash flows, potential roll-up strategies and expected growth trajectories of these facilities.
Growth in residential real estate construction remains strong, and we expect it to continue in 2025 due to limited housing supply. The potential for new tariffs between the United States and its trading partners could lead to further inflationary pressures driving up costs. Multifamily housing is attracting investment due to higher demand from potential homebuyers seeking more affordable housing options following the inflation over the past few years. In 2024, the industry experienced consolidation, especially on the supply side. For example, in March 2024, MITER Brands acquired PGT Innovations, a window and door manufacturer, for $3.1bn, and in June 2024, Home Depot acquired SRS Distribution, a residential specialty trade distribution company, for $18.3bn. We expect deal activity to increase in 2025 as companies seek to shore up their buying power in response to higher costs.
Engineering services companies are a bright spot in the deal activity trend. With recurring cash flows and roll-up strategy opportunities, these companies are expected to attract investment from consolidation as well as from private equity. Companies may seek to do ‘acqui-hire’ deals, which involve buying out a company primarily for the skills and expertise of its staff, in response to competition for key labour skills, especially in labour-intensive sectors such as engineering and development.
E&C firms are adopting AI and digital technologies to enhance productivity, improve customer experience and streamline operations. Firms leveraging AI for operational improvements, both incremental and transformative, are expected to lead the sector. Companies are looking for digital skills through acquisitions, and they are using AI to enhance project management, optimise resource allocation, and improve safety standards to increase competitive advantages and support capital allocation.
Dealmakers must stay agile and strategically focused to capitalise on emerging opportunities and navigate the challenges ahead. E&C companies continue to innovate, as highlighted by the early adoption of AI for competitive advantages in initial design automation and product development. Firms with high infrastructure exposure—including engineering services, intelligent transportation, and power and telecommunications—continue to be attractive assets in this environment.

M&A activity within the industrial manufacturing sector is anticipated to grow in the near to medium term from a relatively stable base. While ongoing uncertainties related to tax rates, inflation and interest rates are influencing market dynamics, deal activity is expected to be driven primarily by corporate spin-offs and the divestiture of non-core operations as companies seek to streamline their operations and focus on their core business.
Ongoing innovation in manufacturing processes continues to play a pivotal role in driving M&A activity. Manufacturers continue to invest in the modernisation of both their product offerings and their internal operations. Technological advancements—particularly in AI, machine learning, predictive robotics and intelligent factories—are consistently enhancing operational efficiency in the industrial manufacturing sector and will be a driver of M&A activity as companies seek to acquire these capabilities. For example, in October 2024, Siemens announced its proposed $10.6bn acquisition of Altair Engineering, a provider of software in the industrial simulation and analysis market, to build leadership in industrial software.
Companies are actively identifying non-core assets to divest with the aim of focusing their portfolios to concentrate on key operations. This is expected to increase carve-out divestitures and the restructuring of distressed assets, driving M&A activity in 2025. For example, in July 2024, Johnson Controls announced it had entered into a definitive agreement to sell its residential and light-commercial HVAC operations to simplify the company’s portfolio and enhance strategic focus on its core business. As companies strive to maintain a competitive edge in the market, strategic reviews of portfolios, supply chains and global footprints will be a main focus. The magnitude of these deals is expected to vary—from smaller mid-market deals to mega transactions—with potential buyers ranging from corporate entities looking for strategic investments to private equity firms.
Sustainability initiatives continue to be important for the manufacturing segment. To manage supply chain risks and margins, companies are increasingly interested in transforming manufacturing processes from those reliant on metals to those using more sustainable materials, such as biopolymers, recycled nylon and fibre-based packaging. Businesses are actively refining their practices, incorporating these strategies into their investment approaches and using them as potential tools for enhancing value creation.
Overall, the focus on portfolio refinement, including the divestiture of distressed assets and corporate carve-outs, is expected to drive increased deal activity in the industrial manufacturing sector in 2025. Increased certainty regarding critical focus areas, such as corporate taxes and government regulation and policy, will contribute to improved confidence among executives and dealmakers, leading to more robust M&A activity.

Our commentary on M&A trends is based on data from industry-recognised sources and our own independent research. Specifically, deal values and volumes referenced in this publication are based on officially announced transactions, excluding rumoured and withdrawn transactions, as provided by the London Stock Exchange Group (LSEG) as of 31 December 2024 and as accessed between 6–9 January 2025. This has been supplemented by additional information from S&P Capital IQ, company filings and our independent research. Certain adjustments have been made to the source information to align with PwC’s industry mapping. All dollar amounts are in US dollars. Megadeals are defined as deals greater than $5bn in value.

Michelle Ritchie is PwC’s global industrials and services deals leader. She is a partner with PwC US. Nathan Whitley is a director with PwC US.

The authors would like to thank the following colleagues for their contributions: Mark Anderson, David Bard, Danny Bitar, Mike Brooks, Trevor Dorahy, Katherina Gasser, Chris Haralambous, Sven Heinemann, Michael Huber, Darrell Kennedy, Werner Kinas, Jorg Krings, James Lee, Charles Losa, Gordon Muschett, Ty Pearson, Alexander Pirrie, Michael Portnoy, Joseph Rafuse, Sarah Senyo, Devinder Singh, Daniel Sipple-Asher, Matthew Stanley, Daniel Steiner, Carlos Thimann, Nicolas Veillepeau, Edward Williams, Malcolm Wren and Iain Yuile.

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Global M&A Trends in Industrials & Services

M&A activity in industrials and services looks set to be a growth story in 2025, as companies step up efforts to expand, consolidate and refine their portfolios.

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M&A volumes and values in 2024

Sector M&A trends in industrials and services

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