Industrials and services M&A 2026: mid-year outlook

Automotive M&A is expected to remain burdened by overcapacity, margin pressure and uneven EV adoption. As manufacturers and suppliers reassess their portfolios, divestitures are becoming an important tool to release capital, simplify operations and fund investment in electrification, software-defined vehicles, autonomous driving and other future technologies. Shell’s US$1.3 billion sale of Jiffy Lube to Monomoy Capital Partners illustrates this trend.

At the same time, buyers are increasingly favouring targeted investments over full acquisitions to access critical capabilities in software, AI, autonomous driving and electrification. SMB Holding Corporation’s US$300 million equity investment in Rivian and Uber’s planned investment of up to US$1.25 billion through 2031 to support Rivian’s autonomous robotaxis demonstrate how capital is being directed towards next-generation mobility platforms.

Regional considerations are also playing a greater role in transaction strategy as tariffs, supply chain risks and local manufacturing requirements redefine investment decisions. Chery South Africa’s acquisition of Nissan South Africa’s manufacturing assets in Pretoria highlights the growing importance of regional production and market access.

Looking ahead, we expect automotive M&A to remain disciplined and strategically focused. Buyers are likely to prioritise transactions that improve capital efficiency, strengthen regional resilience and provide flexibility across internal combustion, hybrid, electric and autonomous technologies rather than relying on a single technology pathway.

Manufacturing M&A continues to centre on businesses that improve productivity, strengthen supply chains and provide exposure to AI infrastructure and automation.

Growing investment in data centres, grid modernisation and the energy transition is supporting demand for manufacturers of power equipment, testing and measurement systems, thermal management and connected industrial technologies. ESCO Technologies’ approximately US$2.35 billion acquisition of Megger Group highlights continued buyer appetite for electrification and power infrastructure platforms.

Automation is also becoming a more important investment theme as manufacturers respond to labour shortages, rising costs and the need for more flexible production. Buyers are expected to target robotics, industrial software, sensors and connected systems that improve operational efficiency and resilience. PwC’s Global Industrial Manufacturing Sector Outlook 2026 projects that the median share of manufacturers with highly automated processes will increase from 18% today to 50% by 2030.

At the same time, portfolio reviews, geopolitical uncertainty and supply chain regionalisation are reshaping deal activity. Companies continue to divest non-core assets, localise production and reconfigure supply chains, creating opportunities for buyers seeking strategic exposure to AI infrastructure, automation and resilient manufacturing platforms.

In the months ahead, buyers are likely to remain focused on assets that strengthen productivity, supply chain resilience and long-term competitiveness in an increasingly automated industrial landscape.

Engineering and construction M&A remains supported by long-term investment in energy, digital infrastructure, technical services and public infrastructure. By contrast, commercial and residential construction is likely to remain more subdued.

Investment in power grids, data centres and other critical infrastructure continues to support demand for engineering and utility platforms. Leidos’ US$2.4 billion acquisition of ENTRUST Solutions Group and WSP Global’s US$3.3 billion acquisition of TRC Companies highlight continued buyer appetite for businesses exposed to grid modernisation, energy transition and infrastructure advisory services.

The long-term outlook remains favourable. PwC’s Global Infrastructure Outlook 2025–50 forecasts cumulative global infrastructure investment of US$151 trillion by 2050, supporting demand for engineering businesses with the expertise to deliver complex infrastructure projects. Colliers’ US$700 million acquisition of Ayesa Engineering reflects continued interest in platforms with broad infrastructure capabilities.

Private equity investors also remain active, particularly in asset-light engineering, technical services and programme management. Blackstone’s proposed US$2.5 billion acquisition of Champions Group demonstrates continued sponsor appetite for scalable services businesses with resilient growth prospects.

Looking ahead, we expect buyers to remain focused on infrastructure-linked platforms that combine technical expertise, strong execution capabilities and exposure to long-term, policy-supported investment trends.

Business services dealmaking remains active during the second half of 2026, although buyers are applying greater scrutiny to how AI is changing business models, service delivery and long-term valuations. While recurring revenue, scalable delivery and strong client relationships remain important, investors are distinguishing more clearly between businesses where AI enhances specialist expertise and those that are more exposed to pricing pressure, automation and margin compression.

Buyer interest is expected to remain strongest in IT managed services, cybersecurity, infrastructure services, certification, maintenance and AI implementation, where technology strengthens productivity and client value. By contrast, labour-intensive professional services such as accounting, legal and advisory are facing more disciplined valuations as buyers reassess automation risk and the durability of traditional billing models.

Outsourcing is also evolving from labour arbitrage towards technology-enabled service delivery. PERSOL’s acquisition of an 85% stake in AI-driven staffing platform Gojob SAS and NTT DATA’s announced acquisition of WinWire demonstrate continued demand for businesses that help clients deploy AI at enterprise scale.

We expect buyer interest to remain strongest for businesses that combine recurring revenue, specialist expertise and technology-enabled delivery, particularly where AI strengthens productivity, client relationships and long-term margin resilience.

Aerospace and defence is forecast to remain one of the strongest areas of industrials and services M&A during the second half of 2026. Rising defence budgets and long-term modernisation programmes are providing buyers with greater visibility into demand, while AI is expanding defence capabilities and expanding the range of acquisition targets.

Buyer interest is focused on defence technology, including AI-enabled software, secure digital platforms, autonomous systems, drones, electronic warfare and other mission-critical technologies. As a result, the buyer universe is broadening beyond traditional defence contractors to include software companies, specialist suppliers and industrial technology businesses.

Geopolitical developments are also influencing deal activity. Higher defence spending and a growing focus on industrial sovereignty are supporting consolidation, regional partnerships and investment in strategic capabilities, particularly in Europe, as reflected in Leonardo’s acquisition of Iveco Group’s defence business. At the same time, national security considerations are making partnerships and joint ventures an important alternative to outright acquisitions in sensitive areas.

Commercial aerospace continues to support deal activity through strong demand for maintenance, repair and overhaul (MRO) services, driven by growing air travel, ageing aircraft fleets and ongoing supply chain constraints. TransDigm’s acquisition of Jet Parts Engineering and Victor Sierra Aviation Holdings highlights continued buyer appetite for differentiated aftermarket assets.

For the remainder of 2026, competitive advantage will depend on speed, strategic sovereignty and technological leadership, with buyers competing for scarce capabilities that strengthen long-term resilience.