Diversified Industrials Q2 2025

Executive Summary

M&A activity in the diversified industrials sector remained strong in Q2 2025, with transaction volume reaching a five-year high of 1,434 deals in the LTM period. Valuation multiples showed modest improvement, with median TEV/EBITDA rising to 11.15x and TEV/Revenue increasing to 1.74x—signaling renewed buyer confidence amid stabilizing market conditions. Strategic buyers continued to dominate the landscape, accounting for over 85% of total deal flow. Notable megadeals and continued geographic breadth underscored the sector’s attractiveness. Looking ahead, consolidation, operational synergies, and international interest are expected to sustain healthy momentum into the second half of 2025.

Market Dynamics

Q2 2025 saw continued resilience in the diversified industrials space, with deal volume reaching 1,434—up slightly from the prior year. Median TEV/EBITDA multiples edged up to 11.15x, while revenue multiples rose to 1.74x, reflecting renewed appetite for quality assets. Strategic buyers led activity, targeting companies with strong operational fundamentals and scalable platforms. Investors favored consolidation plays and defensible market positions amid ongoing macroeconomic uncertainty.

Buyer Landscape

Strategic Acquirers: Strategic buyers remained the dominant force in Q2 2025, accounting for 87% of closed transactions (1,219 of 1,398) in the LTM period. Activity was broad-based, with heightened interest in industrial automation, packaging, and building products. Buyers focused on vertical integration, supply chain efficiencies, and category leadership, underscoring a continued push for scale and resilience.

Financial Buyers: Financial sponsors represented 13% of deal flow (179 of 1,398) in the LTM period, maintaining a disciplined investment approach. Target selection favored asset-light models, proven EBITDA performance, and opportunities for bolt-on acquisitions. Sponsors showed strong interest in engineered components and niche manufacturing, where growth and value creation potential aligned with fund strategies.

Industry Comparison

Diversified Industrials continued to demonstrate resilience amid macroeconomic uncertainty, with M&A activity benefiting from stable demand in infrastructure and manufacturing subsegments. However, valuation multiples moderated slightly due to rising interest rates and cautious buyer sentiment, reflecting broader market volatility. Compared to high-growth tech and healthcare sectors, the industrials space remains steady with strong focus on operational efficiencies and supply chain optimization.^{1 2}

Geographic Expansion

Top U.S. States: Texas led all states with 136 transactions, followed by California (119) and Florida (99), reflecting strong deal flow in industrial hubs with robust infrastructure and manufacturing bases.

Cross-Border Trends: U.S.-based targets continued to attract steady international interest, with cross-border buyers pursuing scale, innovation, and strategic footholds in key U.S. markets.

Notable Transactions

Largest Transactions Closed

Other Strategic Buyer Transactions Closed

Other Financial Buyer Transactions Closed

Emerging Trends

Key trends shaping Diversified Industrials M&A:

1. Sustainability and ESG Integration
   Acquirers increasingly prioritize targets with robust ESG frameworks, particularly in energy-efficient manufacturing and circular economy initiatives. For instance, Danaher’s acquisition of a sustainable materials firm highlighted this focus.³
2. Smart Manufacturing and Industrial IoT
   Investment surged in companies advancing Industry 4.0 capabilities such as predictive maintenance and real-time data analytics. Siemens’ recent buyout of an industrial AI platform exemplifies this trend.⁴
3. Supply Chain Resilience
   M&A targets with vertically integrated supply chains or reshoring capabilities commanded higher premiums amid persistent global disruptions.⁵
4. Subsector Spotlight: Aerospace & Defense
   Heightened government spending and geopolitical tensions spurred acquisitions in aerospace components and defense technologies.⁶
5. Subsector Spotlight: Industrial Equipment
   Automation and robotics deals increased, driven by labor shortages and efficiency mandates.⁷
   

Outlook for Next Quarter

Opportunities: Growing infrastructure investments under federal programs are expected to stimulate M&A in construction and heavy equipment sectors, with strategic buyers seeking scale and innovation.⁸

Risks: Inflationary pressures and rising raw material costs may constrain margins, impacting deal valuations and deal flow.⁹

Predicted Activity: Expect elevated PE activity focusing on platform builds in niche industrial automation and ESG-compliant manufacturing firms, coupled with selective divestitures by conglomerates streamlining portfolios.¹⁰

PCE Transactions

Served as advisor to the trustee of the Herregan ESOP

Served as advisor to Burkhalter Rigging on their growth capital raise

Served as advisor to W.W. Grainger, Inc. on their acquisition of Imperial

Served as advisor to Hisco, Inc. on their acquisition of All-Spec

Served as advisor to Kreuger International as they became 100% ESOP owned

Served as advisor to National Oak Distributors on their capital raise for ESOP purposes

Served as advisor to Zak Incorporated on their acquisition by LAI International and RLJ Equity Partners

Served as advisor to Crane Rental Corporation in their recapitalization by Hammond Kennedy Whitney

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