en.Wedoany.com Reported - Professional services firm PwC released its mid-2026 outlook report, with data showing that industrial manufacturing M&A activity rose to $173 billion over the past year, a 28% increase from $135 billion in fiscal 2025.
PwC attributes this growth to the convergence of artificial intelligence infrastructure, grid modernization, and defense and resilience spending. Large-scale deals, scope-oriented acquisitions, and strategic buyers are deploying capital in unprecedented ways, while macroeconomic uncertainty has become a permanent feature.
The report shows that mega-deals exceeding $5 billion accounted for 56% of transaction value, compared to 18% in fiscal 2024. Excluding mega-deals, the average deal size grew 31% from fiscal 2024 to $169 million. Average transaction value has steadily climbed over the past two years, reaching $155 million in fiscal 2024, $288 million in fiscal 2025, and $375 million in the latest annual period. The 139% increase indicates that buyers are paying a premium for transformative capabilities rather than incremental scale.
Electrical equipment, thermal management, automation and controls, and advanced components attracted ultra-high valuations. From 2021 to 2025, industrial manufacturing completed 155 convergence deals with a total transaction value of $532 billion, surpassing any other industrial subsector. AI and automation are now central to investment due diligence, with investors increasingly demanding verification of AI's tangible impact on the P&L through productivity improvements, labor cost offsets, and predictive maintenance savings before committing to premium valuations.
Private equity remains active in the upper middle market, but strategic acquirers accounted for 86% of transaction value over the past 12 months and 86% of deal volume year-to-date in 2026. Conglomerate simplification, exemplified by Honeywell's three-way split, is generating a wave of divestiture projects in automotive-related, advanced materials, and non-core industrial assets, as companies shift their portfolios toward electrification, software, and defense-related manufacturing.
The macroeconomic backdrop has become a permanent structural feature rather than a cyclical headwind. Driven by global supply chain restructuring and reshoring investments, cross-border transaction value accounted for 56% of the total over the past 12 months, compared to 30% in fiscal 2022. Among these, transaction value targeting the U.S. nearly doubled to $72 billion in fiscal 2025. Tariffs, geopolitical friction, interest rate volatility, and AI-driven infrastructure demand have become normal factors that are driving rather than suppressing M&A activity.
PwC believes two forces will define industrial manufacturing M&A. In convergence, AI infrastructure, grid modernization, and defense and resilience spending are drawing capital to the same constrained industrial supply base, including electrical equipment, thermal management, automation and controls, and advanced components. This concentrates value on assets serving multiple demand streams simultaneously, commanding premiums 15% to 30% above the industry median, peaking in AI computing and data center-related assets. In the divestiture pipeline, nearly 69% of industrial companies that executed acquisitions exceeding $5 billion since 2021 also conducted divestitures, with this proportion exceeding 86% among serial acquirers. The most attractive divestiture projects in advanced materials, automation components, and energy transition assets will not wait for macro clarity.
The report advises dealmakers to bet on convergence rather than single-theme exposure, as assets serving two to three demand streams possess durable pricing power, while those serving only one face selective competition. Due diligence should test capability density against convergence demands. Buyers now require measurable AI returns before paying premium valuations, including capacity improvements, labor cost offsets, and predictive maintenance savings. The era of paying premiums for AI stories without quantifiable impact is ending. Sellers should act early on divestiture projects, positioning ahead of the process.
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