Dealmakers in the North American Industrials and Chemicals sector are expecting momentum to continue into 2026 after M&A volume continued its surge in 2025 due to softening inflation and more comfort around tariffs.

Industrials and Chemicals M&A was up 33% in 2025, with deal volume climbing from USD 198.4bn in 2024 to USD 264.4bn in 2025, even as deal count was marginally down 1% to 2,091 transactions from 2,113 the year prior.

North America retained its dominance, accounting for 41% of global deal volume. A total of four megadeals valued more than USD 10bn recorded in 2025, three of them came in 1H25.

Exits surged by 81% from USD 40bn in 2024 to USD 72.6bn in 2025. The highest valued exit was the USD 13.4bn deal involving Nova Chemicals, which was acquired after ADNOC and OMV agreed to merge Borouge and Borealis. Private equity firms were highly active in exits with chemicals, machinery, construction/building, aerospace, and defense featuring prominently among the year’s top 10 exits. This highlights PE’s strategic focus on monetizing investments in core industrial subsectors.

On the carve-out side, deal values have varied, according to Alexandra Wilde, partner at Clifford Chance. Some mega-deals have skewed overall valuation data, and backing those out shows a more significant delta across the sector. There has also been an increase in dual-track processes, Wilde said, as companies assess the right exit path.

Previously, one buyer could clearly outbid the rest, Wilde noted. Now the playing field is more even, particularly as strategic buyers compete aggressively to expand specific business lines rather than appear opportunistically.

If you build it, M&A will come

The construction/building sector was among the most active within Industrials in 2025. The sector’s share of Industrials & Chemicals deal volume expanded to 43% in 2025 from 36% a year earlier, supported by five of the year’s top 10 transactions, including two mega deals. This included the highest valued spin-off, Holcim’s USD 33.7bn spin-off of its North American business, Amrize, in June. Beacon Roofing Supply’s sale to QXO for USD 11.5bn was another high-value deal in the segment.

The construction/building posted a 60% increase in deal volume, rising from USD 70.4bn in 2024 to USD 112.6bn in 2025, according to Mergermarket data. Buyer interest in building products remains strong, and that interest should help facilitate transactions, Wilde said.

The sky is the limit

The aerospace and defense sector was one of the rare areas in the North American M&A market where volume fell but deal count rose. Overall, A&D contributed about USD 16bn in deal volume in 2025, according to Mergermarket data, down from USD 23bn in 2024. Meanwhile, deal count skyrocketed over 30% from 86 in 2024 to 114 in 2025.

Private equity involvement in A&D grew stronger as the market adjusted to the US tariff policy, following a sweeping hike on these levies in April, according to John Pollack, co-chair of Gibson Dunn’s Private Equity Practice Group. Pollack also noted an increase in the US defense budget. Earlier this month, President Donald Trump called for a USD 1.5tn defense budget in 2027.

Chris Oliver, a managing director for DC Advisory and senior leader of the firm’s Aerospace, Defense & Government Services (ADG) group, said anything that is unmanned is also a hot area, as they reduce the need to risk human lives, and these technologies offer low cost for high quantity, he said.

George Sampas, co-chair of Gibson Dunn’s Mergers & Acquisitions Practice Group and head of Cross-Border M&A, named drones as a hot area within the A&D sector for 2026, highlighting their ability to swarm enemies.

With less reliance on the US, European defense budgets have increased, Sampas said. This is expected to lead to more M&A in the region, with US companies potentially looking to acquire European assets. With European defense budgets going up, US private equity firms are looking at Europe and seeing an opportunity for M&A, Oliver added.

Sampas noted that the aerospace maintenance, repair and overhaul (MRO) sector continues to be an attractive area for M&A. Pollack added the sector is ripe for consolidation. With many older airplanes flying, there is more of a need to repair them, he added, making companies in the aerospace MRO market more attractive targets, as noted in previous Mergermarket reports. One example is West Star Aviation’s sale to Greenbriar Equity for around USD 1.5bn at a 15x EBITDA multiple, according to Mergermarket. Some aerospace MRO companies currently in the pipeline include GA Telesis and Aero Accessories, according to reporting by this news service.

Chemicals and onshoring 

The chemicals sector had about 54bn in deal volume in 2025, according to Mergermarket data, which was up about 10% from 2024. Deal count dropped slightly from 198 in 2024 to 164 in 2025.

Tariffs and geopolitical uncertainty continue to drive deal activity, Wilde said. Chemicals is a good example of where onshoring manufacturing has become more important, with acquiring an existing facility often more advantageous than building one, as it provides greater certainty in both the short and long term.

Specialty chemicals are particularly interesting, she said, because sourcing can shift geographically, with imports in some cases moving away from China toward other APAC markets such as Malaysia, rather than disappearing entirely.

Advanced metals manufacturing to see less activity

Hubert de la Vauvre, a director and senior member of BGL’s Metals & Advanced Metals Manufacturing group, said while the fabrication and machining sector took a bit of a hit in 2024 and 2025, so companies may take a break to see what happens in the first quarter of 2026. The good news is buyers are very active and want to continue to diversify their end markets, de la Vauvre added. The issue is more about whether there’s going to be enough good assets that buyers are going to want to have, he added.

Middle market deals could pick up, de la Vauvre said, as companies are going to need to start competing against three sizable competitors in the service centers market. He named Reliance as number one, with the other two juggernauts created by the announced combination of Olympic and Ryerson and Worthington’s potential takeover of Klockner.

Others in the industry are going to want to make some moves, de la Vauvre said, adding that these companies could look at acquiring service centers valued at around USD 50m to USD 60m.