As the broader M&A market gains momentum, industrial manufacturing is emerging as a key area of activity. Ryan McComb, our Managing Director, sat down for a midyear check-in on the trends shaping the back half of 2025. From automation and nearshoring to a rebound in deal flow, Ryan shares what he’s seeing and where we’re headed next.

Q: What are you seeing in the market right now? Does your experience line up with the increase in activity we’re seeing?

The broader M&A market is beginning to pick up in activity after a slow 2024, and we’ve seen that reflected in industrial manufacturing. There is more willingness to transact, and we’re optimistic that the dealmaking environment will continue to improve in the second half of 2025. While the policy environment remains fluid, there’s better alignment between buyers and sellers on valuations, and we are seeing a growing pipeline of opportunities. In particular, we see momentum in sectors tied to aerospace, automotive, and infrastructure, where trends like electrification and supply chain localization create interesting investment opportunities. Overall, we expect 2H 2025 to be a relatively active year for both acquisitions and exits.

Q: What’s fueling this activity?

Investors were waiting for clarity on macroeconomic and policy-related dynamics, and stabilized inflation and interest rates have helped both buyers and sellers move with more confidence in recent months. For industrial manufacturing and distribution businesses, the tariff policies have actually encouraged nearshoring and regional manufacturing, while infrastructure spending continues to drive demand for industrial equipment and services. The shift toward regionalization is providing strong tailwinds for U.S.-based manufacturing and distribution, which we see as an area of opportunity for our current portfolio companies and future investments. Additionally, there has been an accumulation of dry powder in the lending and sponsor communities, and groups need to put capital to work, which is fueling a rebound in the M&A market. Lenders are providing more aggressive terms, and sponsors with assets that have been shelved for the last few years need to generate liquidity for their LPs. The combination of these factors is beginning to fuel increased transaction activity. Together, these factors are creating a favorable environment for capital deployment—particularly in businesses with regional operations, exposure to automation, and alignment with long-term themes such as mobility and infrastructure investment.

Q: Are there any subsectors within machinery and industrial equipment that are driving this? Why is that?

We’re seeing growth in businesses focused on automation and advanced manufacturing, as companies modernize legacy equipment and seek to make their workforce more efficient. Mobility sectors are also active, with electrification, lightweighting, and autonomous technologies continuing to drive transformation. These shifts are reshaping supply chains and increasing demand for component suppliers that can support evolving OEM requirements. Given the strong tailwinds and growth trajectories of companies in these subsectors, we anticipate strong ongoing transaction activities for the second half of the year and beyond.

Q: Do you think this momentum is expected to continue into 2026?

The trends we’re betting on, including nearshoring, automation, and infrastructure development, will play out over the coming months and years. Now that we’re back on a more regular path of industry-wide M&A activity, we expect that momentum to continue in 2026 with continued strength in core industrial end markets. Even with regulatory twists and turns, many of our portfolio companies operate primarily within North American supply chains, which helps limit direct exposure to shifting tariff regimes and positions them well amid ongoing trade policy uncertainty. We believe pent-up demand from 18 months of stagnant M&A markets will accelerate into 2026 as capital providers and sponsors need to put capital to work and sponsors need to sell longer-in-the-tooth portfolio companies to generate liquidity for their LPs, which will create a favorable M&A environment.

Q: Are there any trends you believe will define the next 6–12 months in the machinery/industrial equipment space?

We continue to prioritize investment in automation and advanced manufacturing, which are growing due to labor constraints and the resulting need for greater workforce productivity. Within the mobility sector, innovation in how vehicles are designed, produced, and brought to market continues. Despite the slower-than-anticipated shift to electrification in the US, reshoring in automotive manufacturing represents a huge opportunity for suppliers. Aerospace is another key growth area. There has been significant investment aimed at improving fleet fuel efficiency, and electrification is still in its early stages within the sector. We’re also watching the eVTOL space closely as years of capital investment are now translating into commercial momentum, creating favorable conditions for several of our portfolio companies.