Diversified Industrials Q4 2025

Executive Summary

Company valuations remained resilient in Q4 2025 despite a sharp decline in transaction volume. Across 538 deals over the past year (112 in Q4), the median values were 12.26x EBITDA and 1.69x revenue (vs. 11.68x EBITDA / 1.72x revenue in Q4 2024 LTM). Deal volume fell to 538 LTM (from 792 LTM in Q4 2024), reflecting a more selective M&A environment as buyers navigated elevated uncertainty.

Strategic buyers made up 84.01% of all deals (452 of 538), continuing to drive sector consolidation and synergy-led acquisitions. Financial buyers represented 13.01% (70 of 538), Undisclosed buyers accounted for 2.97% (16 of 538), largely concentrated in the lower middle market.¹

The largest Q4 transactions included Foundation Building Materials’ $8.8 billion sale to Lowe’s, DNOW’s $1.8 billion acquisition of MRC Global, and TopBuild’s $1.0 billion acquisition of Specialty Products and Insulation, alongside Federal Signal’s $480 million acquisition of New Way Trucks and Kadant’s $175 million acquisition of Clyde Industries. Collectively, these deals reflect continued buyer appetite for scaled distribution and trading platforms, as well as mission-critical industrial equipment and engineered machinery with durable end markets and recurring aftermarket or replacement-driven demand.

Despite a tougher macro backdrop, buyers continued to pay for quality. Ongoing tariff policy uncertainty, shifting sourcing strategies, and softer manufacturing indicators reinforced preference for assets with aftermarket/service mix, mission-critical products, and pricing power.² ³

“Despite a slowdown in overall deal volume, the Diversified Industrials sector remains fundamentally strong,” said Michael Rosendahl, Managing Director at PCE. “Essential categories such as industrial distribution, engineered components, and specialty manufacturing continue to see steady buyer demand, reflecting the sector’s resilience and long-term importance.”

Market Dynamics

Deals: 112 in Q4; 538 LTM (vs. 792 LTM a year ago). Valuations: LTM medians 12.26x EBITDA / 1.69x revenue. The sector saw lower deal volume but stable-to-higher EBITDA multiples, suggesting a “flight to quality” as buyers concentrated capital on differentiated businesses with defensible margin profiles and clear synergy pathways.

Macro conditions remained mixed into year-end. US manufacturing indicators were still in contraction territory late in Q4, pressuring discretionary capex-linked subsectors.² At the same time, industrial M&A remained active where targets offered distribution density, procurement leverage, and operational simplification opportunities.

Tariff impacts became more central to corporate planning in late 2025. Management teams increasingly focused on supply-chain reconfiguration, dual sourcing, and nearshoring, with tariff-related uncertainty influencing diligence around customer pricing, supplier contracts, and inventory strategy.³ ⁴

Diversified industrials activity was supported by demand for scale, supply-chain integration, and aftermarket/service capabilities, particularly across products distribution and essential MRO / industrial supply channels. Strategic acquirers continued to lead as corporates pursued vertical integration and route density, while financial sponsors remained selective amid financing discipline and heightened diligence requirements.¹ ⁴

Buyer Landscape

Strategic Acquirers: 452 of 538 LTM (84.01%), focused on scale and synergy capture across building products, industrial distribution, engineered components, and specialized equipment.¹

Financial Buyers: 70 of 538 (13.01%), targeting stable cash-flow businesses and selective platform/bolt-on opportunities.¹

Undisclosed Buyers: 16 of 538 (2.97%), mainly private operators and smaller strategic outcomes.¹

Total Transactions: 538

Industry Comparison

Diversified Industrials accounted for 3.5% of overall Q4 U.S. M&A volume and 3.9% of LTM activity (112 / 3,186 in Q4; 538 / 13,776 LTM). The sector’s lower share versus prior quarters reflects the broad-based slowdown in transaction pace, but valuation multiples remained stable as buyers prioritized resilient cash flows and synergy-forward industrial platforms.¹

Geographic Expansion

Top U.S. states by seller count (LTM): Texas (47), California (43), Florida (32), Illinois (28), Ohio (26), Michigan (26). The Sunbelt continued to exhibit strong activity tied to population growth and construction/services demand, while Midwest states remained steady due to concentration in manufacturing, machinery, and industrial supply ecosystems.¹

Notable Transactions

Largest Transactions Closed

Other Financial Buyer Transactions Closed

Other Strategic Buyer Transactions Closed

Emerging Trends

Key trends shaping Diversified Industrials M&A:

1. Distribution-led consolidation
   Strategic buyers continue integrating specialty distribution and installation-adjacent platforms to capture procurement savings, customer cross-sell, and route density.⁴
2. Tariff-driven supply-chain repositioning
   Increased focus on nearshoring, dual-sourcing, and supplier diversification is shaping acquisition rationales and diligence priorities.^{3 4}
3. Supply Chain Resilience
   Nearshoring and localization strategies remain central to manufacturing acquisition rationales.^{3 5}
4. Aftermarket / service mix premium
   Buyers remain biased toward businesses with recurring maintenance revenue, consumables, and mission-critical replacement cycles that buffer cyclical demand.^{2 4}
5. Operational efficiency as a return lever
   With elevated uncertainty, acquirers are underwriting integration and cost-takeout more explicitly to protect returns.⁴
6. Selective sponsor activity
   Sponsors remain active, but favor bolt-ons and niche platforms with strong cash conversion and levers for operational improvement.⁴

Outlook for Next Quarter

Opportunities: Continued interest in building products distribution, industrial supply, engineered components, and specialized equipment where end markets are supported by repair/retrofit, infrastructure maintenance, and recurring replacement cycles. Strategic acquirers are likely to remain the primary driver of volume given synergy and portfolio optimization objectives.⁴ 

Risks: Tariff escalation and policy uncertainty, manufacturing softness, and input-cost volatility could pressure margins and slow deal pacing, especially for discretionary capex-linked subsectors.^{2 3} 

Predicted Activity: A strategic-led market with continued bolt-on consolidation, while sponsors remain disciplined and focus on sectors with defensible demand, pricing power, and clear operational improvement pathways.⁴ 

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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