Industrial M&A soars in 2024, fueled by 2H surge in private equity – North America Industrials Trendspotter
- Volume for Industrials, including chemicals, reached USD 197bn
- Construction/Building products was biggest segment, comprising one-third
Falling interest rates and softening inflation led to a surge in North American Industrials and Chemicals M&A deal value in 2024, according to Mergermarket data.
The value of disclosed deals in 2024 reached USD 197bn, up close to 64% from USD 120.5bn in 2023, according to Mergermarket data. Private equity buyouts exploded in 2H24, to USD 22bn, up close to 250% from the first half of the year when deal value was at USD 6.4bn.
The number of deals remained steady, with 1,990 transactions announced for 2024, compared with 2,002 in 2023.
Some of the larger transactions include Home Depot’s [NYSE:HD] USD 18.25bn acquisition of SRS Distribution, Amcor’s [NYSE:AMCR] proposed USD 17.7bn merger with Berry Global [NYSE:BERY], Summit Materials’ [NYSE:SUM] announced acquisition of Quikrete for USD 11.9bn and Boeing’s [NYSE:BA] pending acquisition of Spirit AeroSystems [NYSE:SPR] for around USD 8bn.
There is strong investor appetite for quality industrial assets and optimism surrounds the sector, with some predicting a 20%-25% increase in activity, said Clifford Chance’s M&A partner, David Brinton. The administration’s focus on deregulation and pro-business policies could further boost dealmaking, he added.
Buildup in construction
The construction and building products sector contributed about USD 70.8bn in deal value on 868 deals announced in 2024, according to Mergermarket data. The value of disclosed deals represented 36% of overall I&C deal value for 2024.
The building supply sector should perform well this year, driven by potentially lower interest rates and pent-up demand for new and affordable housing and the need to replace aging infrastructure, Brinton said.
Housing is a critical issue, particularly for younger people struggling with the shortage of affordable homes in many markets, he said. Companies manufacturing windows, doors, cabinetry, flooring and other building products are well-positioned to benefit from these trends, he said.
Aerospace & defense to continue ascent
The aerospace and defense sector contributed about USD 20.1bn in deal value on 85 deals announced in 2024, according to Mergermarket data. The value of disclosed deals increased about 20% from the previous year.
Several aerospace and defense processes are expected to launch at the beginning of this year, including The Sterling Group’s sale of West Star Aviation and Boeing’s [NYSE:BA] sale of Jeppesen, a sector advisor said.
This sector advisor said defense and national security are expected to be prioritized, with areas such as maritime defense, subsea warfare and unmanned systems expected to see M&A activity. Deal activity is also expected in the areas of space, cybersecurity and hypersonics, he said.
A second sector advisor said defense contractors may look at asset sales this year including RTX [NYSE:RTX], which could try to sell its landing gear business. He noted that private equity will remain active as well, pointing to Triumph Group’s [NYSE:TGI] sale process as one example.
The aerospace sector is poised for growth, fueled in part by an aging commercial aircraft fleet requiring increased repairs or replacement, Brinton said. He noted that potentially lower financing costs driven by a resurgent asset backed securities market also could spur investor interest in the sector.
Materials-based industries in spotlight
The chemicals sector contributed close to USD 50bn in deal value on 189 deals announced in 2024, according to Mergermarket data, making it the second most active sector in terms of deal value.
Likewise, the metal and steel sector contributed around USD 24.2bn in deal value on 184 deals announced in 2024, according to Mergermarket data, making it the third most active sector in terms of deal value.
Going forward, broad tariffs on steel imports may push some non-US manufacturers to consider establishing US-based manufacturing operations, Brinton said.
Meanwhile, lessening supply chain volatility in the chemicals industry may lead to increased M&A in the space, Brinton said.
Packaging, once a hotbed of middle market activity, cooled off in the past 18 months, according to William Blair Managing Director Brian Flynn. He said this was largely based on business performance reasons. But there is an opportunity for a large supply of such assets to come to market this year and in 2026, he added.
Environmental engineering/consulting space should see consolidation
M&A in the environmental consulting and engineering space should flourish this year, a private equity executive predicted. The Infrastructure Investment and Jobs Act and other government funding are bolstering these sectors as well as development in the power grid and AI-reliant data center fields, a trend expected to attract both private equity and strategic investors, he said. Growing demand for water treatment, safe battery storage and the energy transition from fossil fuels to greener alternatives should also drive activity.
WSP [TSX:WSP], which acquired Power Engineers for roughly USD 1.8bn in August, could continue consolidating, as could Montrose Environmental [NYSE:MEG], the executive noted.
Warburg Pincus, as well as Blackstone Energy Partners, which took a majority position in environmental engineering and design consulting firm Geosyntec Consultants two years ago, could continue an M&A spree in the sector, the executive added.
Targets with north of USD 20m of EBITDA could fetch multiples of 10x or more, said the executive, while smaller groups could go for 6-8x.
Auto parts suppliers could attract interest
In the auto space, parts suppliers, especially those involved with vehicle lightweighting and fluid handling, could come to market this year, said Angle Advisors partner Cliff Roesler. These targets could be valued at 6-7x EBITDA, according to Roesler.
Roesler cited a meaningful increase in Chinese acquirers looking to build out their production capabilities in North America, specifically the US. “In 2017, the influx of Chinese capital more or less dried up but appears to be roaring back now. Since the Trump election, we have seen an enormous increase in acquisitive interest for all kinds of vehicular components still manufactured in the US.”
Federal contractors could draw scrutiny
While less scrutiny over mergers is expected moving forward, foreign investment in the US is expected to draw continued scrutiny depending on the country, a sector advisor said.
During the first couple of months of 2025, the advisor said the market will watch how the administration’s Department of Government Efficiency (DOGE) initiative plays out. After that, many processes are likely to launch, in part because the investments have been held for some time.