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The industrial manufacturing (IM) sector is navigating through a complex web of economic, geopolitical, and technological factors, shaping the deal-making environment. The first quarter of 2025 (Q1��25) was a period of significant activity and transformation within the IM sector. Overall, deal volume dropped by just over 20 percent, on a QoQ basis. However, that drop was balanced out by a 5.2 percent increase in deal value, on a QoQ basis, with BlackRock’s announced $22.8 billion acquisition of Panama Ports topping the list of deals.

This report examines merger and acquisition (M&A) activity during the first quarter of 2025 across these subsectors: aerospace and defense (A&D); automotive; transportation, distribution, and logistics (TDL); and buildings and construction. We end with an outlook examining how issues and developments, including the Trump administration’s tariffs, could impact where IM deals could move in the second quarter and throughout the rest of the year.

In Q1��25, we observed an ongoing focus on separations of noncore assets and consolidations to gain economies of scale benefits. The automotive industry has seen deals that are propulsion agnostic, accounting for a resurgence of hybrid vehicles, driven by consumer preferences and supply chain challenges. A&D continues to leverage advanced technologies like AI for predictive maintenance, while the buildings and construction sector is increasingly adopting digital tools to enhance efficiency and safety. The TDL subsector is grappling with internal resistance to transformation, yet strategic acquisitions are paving the way for enhanced operational capabilities.

When the first quarter of 2025 ended, we believed the IM sector was poised for continued M&A activity, driven by technological advancements, supply-chain resilience, and strategic growth initiatives. That assessment changed dramatically with the scale of the planned and/or implemented tariffs by the Trump administration. Those tariffs could be particularly impactful to businesses within the IM sector because of their susceptibility to supply chain disruptions, increased costs, and retaliatory measures.

For quite a number of our clients, major strategic decisions are moving more slowly as trade and supply chain uncertainty persists. That said, we believe major deals that are currently underway will continue to progress. On the flip side, prospective dealmaking has significantly slowed. During this period of uncertainty, we see our more acquisitive clients lining up their deal pipeline. By doing that, when the market becomes calmer and more forecastable, these companies will be able to rapidly resume their M&A activity. We believe that guidance is consistent across auto, conglomerates, and A&D.