Global M&A Trends in Industrials and Services: 2026 Outlook

Source: PwC | Date: 2026

Industrials and Services M&A: Accelerating into Disruption

A convergence of structural pressures and long-duration growth themes is shaping M&A activity across the industrials and services (I&S) sectors in 2026. Labour shortages, geopolitical pressure, and persistent supply chain risk are pushing companies to act by acquiring automation, digital, and productivity-enhancing capabilities. At the same time, investment in infrastructure, defence, and energy systems is strengthening end-market demand in select subsectors, supporting targeted dealmaking despite ongoing macroeconomic and trade uncertainty.

Portfolio reshaping remains central to M&A strategy. Corporates are divesting legacy or non-core operations and reallocating capital towards higher-growth, technology-enabled, and service-oriented businesses aligned with digitalisation, the energy transition, and the build-out of AI infrastructure. Private equity is expected to remain a major catalyst across subsectors, favouring recurring-revenue models, fragmented markets, and buy-and-build strategies that enable rapid scaling, platform expansion, and operational value creation.

While the I&S sector is aligned around these common drivers, dealmaking in each subsector will be shaped by distinct priorities in 2026:

• Aerospace and Defence (A&D): Rising global defence spending and geopolitical tension will likely see increased M&A activity across rearmament, components, unmanned systems, space, and aftermarket services, with heightened focus on supply chain resilience and secure sourcing.
• Automotive: Dealmaking remains selective amid overcapacity and capital constraints, with OEMs and suppliers favouring strategic alliances, joint ventures, and targeted acquisitions to advance electrification, software, and autonomous-driving technologies.
• Business Services: Private equity-led consolidation continues in recurring, tech-enabled services, with activity expanding into legal, staffing and business process outsourcing, compliance, managed IT, cybersecurity, and audit-driven platforms.
• Engineering and Construction: Infrastructure, clean-energy, and data centre investment will support M&A activity in specialty contractors and industrial services, particularly those enabling automation, prefabrication, and higher-value, project-critical capabilities.
• Manufacturing: Portfolio reshaping, reshoring, and AI infrastructure demand are driving selective large-scale deals and bolt-ons in automation, energy storage, and life-sciences-adjacent niches.

"In 2026, global M&A in industrials and services is about adaption, not scale. Geopolitical friction, labour scarcity, and supply chain shocks are driving companies to acquire certainty through automation and digitalisation, while private equity consolidates fragmented markets into platforms." — Michelle Ritchie, Global Industrials and Services Deals Leader, PwC US

As industrials and services companies move through 2026, dealmaking behaviour reflects a balance between caution and conviction. Policy uncertainty, trade and tariff volatility, and uneven macroeconomic conditions continue to complicate timing and valuation. Many companies are choosing to move forwards selectively by prioritising transactions that reinforce resilience, secure critical capabilities, or accelerate strategic repositioning.

Key Statistic: 68% — the median percentage of industrials leaders who plan to use advanced technologies to enable or enhance activities across their company's value chain over the next five years, up from a median of 26% in 2025. (Source: PwC's Future of Industrials Survey, 2025)

Spotlight on AI

AI Demand Is Rewiring Industrials and Services Deal Activity

AI compute growth is pulling industrial M&A towards power and reliability. In 2026, AI-scale compute and the energy transition are reshaping the industrials and services deal landscape. Hyperscale and enterprise AI adoption is driving investment in data centres, grid interconnection, and reliability upgrades across Asia, Europe, and North America. This build-out is accelerating demand for switchgear and transformers, backup power and storage, advanced cooling, controls and automation, and digital energy management. As a result, M&A activity is increasingly drawn towards differentiated component platforms, field services networks, and software-enabled solutions that improve uptime and speed to connect.

Industrial portfolios are being reshaped around regulated, serviceable and power-dense assets. Electrification and resilience investment, including grid modernisation, water treatment, and emerging baseload options such as small modular reactors, continue to attract capital, supported by policy and infrastructure programs in Europe and the US. The signals for AI-driven load growth and decarbonisation are pushing industrial companies to reposition portfolios towards power-dense, regulation-advantaged, and serviceable assets with durable aftermarket economics.

Competition is increasing for assets that sit at the nexus of power, automation, and digital. The buyer universe is expanding, and competition is intensifying for scarce assets that sit at the intersection of power, automation, and digital infrastructure. Strategic buyers are closing capability gaps in electrification, thermal management, automation, and digital controls, while private equity is underwriting long-duration growth through platform roll-ups in services, specialty manufacturing, and asset-light software and controls.

With AI load growth and clean-energy buildouts reinforcing each other, M&A activity in this hybrid industrial–infrastructure space is poised to accelerate, favouring assets that combine technical differentiation, service intensity, and regulatory durability.

Global M&A Volumes and Values in 2025

Global industrials and services M&A values rose by 19% in 2025, while deal volumes increased by a more modest 3%. Growth in deal value was largely attributable to an increase in the number of megadeals (transactions valued at greater than $5bn), which rose from seven in 2024 to 13 in 2025. With most megadeal activity concentrated in the US, the Americas saw a 49% increase in deal values, with Asia Pacific and Europe, the Middle East and Africa (EMEA) reporting decreases of 2% and 6%, respectively.

Deal activity in A&D increased by 45%, followed by engineering and construction with an 11% increase, and manufacturing with 4%. Automotive deal activity decreased 1% year over year. Activity in business services M&A decreased 5%, mainly due to weakness in the consumer and talent segments.

Global M&A Trends by Sector

Aerospace & Defence: From Budgets to Build-Out

The 2026 M&A outlook for A&D is supported by rising global defence budgets, geopolitical tensions, supply chain restructuring, and multi-year procurement commitments. Defence modernisation has become a primary catalyst for M&A as buyers prioritise readiness, sustainment, and digital warfighting over new-build platforms. Capital is flowing into capacity, munitions, and software-defined defence areas such as C4ISR, secure cloud and edge infrastructure, AI-enabled systems, and cyber and electronic warfare.

NATO's new 5% of GDP benchmark for defence spending, alongside expanded US and EU rearmament programs, is driving growth in deal activity tied to munitions, integrated air and missile defence, naval platforms, and space assets. Notable transactions include Safran's $1.8bn acquisition of Collins Aerospace's flight control and actuation unit and Boeing's $4.7bn acquisition of Spirit AeroSystems.

Commercial aerospace recovery is providing incremental demand support, while persistent supply constraints in engines, castings, and forgings are intensifying pressure for aftermarket consolidation. US and European acquirers are increasingly targeting maintenance, repair, and operations (MRO); parts distribution; and tiered supplier roll-ups.

Automotive: Structural Transition, Not Cyclical Recovery

Automotive M&A in 2026 remains selective as OEMs and suppliers adapt to overcapacity, capital constraints, and the shift towards software-defined vehicles, where control of system integration and data represents the primary value lever. Dealmaking is increasingly focused on partnerships and targeted acquisitions that diversify revenue through services and digital mobility.

Global overcapacity, margin pressure, and uneven demand continue to weigh on OEM and supplier balance sheets, driving plant closures, footprint consolidation, and asset sales. OEMs and suppliers are prioritising transactions that support electrification and software-defined and autonomous technologies, while avoiding large, balance-sheet-intensive scale deals.

Article based on PwC's Global M&A Trends in Industrials and Services: 2026 Outlook.