Manufacturing Report 1H 2026

• Evolving government policies – everything from trade to onshoring incentives – appear to be driving a renewal in U.S. manufacturing, drawing attention from investors seeking manufacturers who provide products and services in stable, growing sectors such as energy, technology, infrastructure, medical devices, and electrical capacity development and grid hardening.

• A clear value proposition, demonstrated repeatable growth, and a diversified base of long-term customers appear to be in favor as opposed to fickle consumer sectors and the wobbly housing markets.

• Looking ahead, manufacturers and investors will be watching at least two upcoming events that may drive or challenge domestic manufacturing, a Supreme Court ruling on tariffs and a July review of the United States-Mexico-Canada Agreement

Manufacturing, like many other sectors, felt the headwinds of global uncertainty through 2025, driven in part by the uncertainty of global tariffs. As the year unfolded, it cost more to import materials and more to sell finished products abroad. Geopolitical tensions, and elevated interest rates (compared to the pre-pandemic years) provided a drag as well. An anticipated burst in deal activity never really materialized in 2025, although there were some big deals done and activity started to pickup in Q4. Overall, it appears the M&A market was looking for clear value propositions and strategic, calculated growth, not growth at any price. Buyers appear to be drifting from volatile, cyclical sectors and looking instead for stability in defensive producers in areas seen as stable such as aerospace and defense, infrastructure, and industrial manufacturing while producers look to bolster U.S. capacities to avoid global supply chain and tariff implications. 1,2

The year was not without drama. In one headline-grabbing turn, oilfield services titan Baker Hughes snatched Chart Industries – a leader in manufacturing highly-engineered equipment used in energy and gas production – from pump and valve manufacturer Flowserve, outbidding Flowserve with a $13.6 billion offer as it appeared Flowserve was poised to close. 3

Throughout the year, it appeared dealmakers were seeking targets with a sharp focus on their core business. They were also looking for manufacturers in “mission critical” end markets. Rather than targeting manufacturers in cyclical environments, such as the volatile housing market, investors were looking for manufacturers who met highly specific, repeatable needs or maintained long-term agreements with customers with steady projected demand. One area seeing continued growth is in manufacturers who serve a seemingly unending thirst for semiconductors, such as those who produce transformers, switchgear, and power production and management systems fueling tech growth. 4,5

If 2025 was off to a slow start, there were signs of acceleration in closely targeted subsectors. In the second half of the year, interest rates began to settle, and Q4 deal volume saw an uptick, all while private equity coffers remain stuffed with billions in undeployed capital while others in private equity have aging portfolios with companies they’ve held longer than they intended. It doesn’t hurt that the current administration in Washington appears to favor an American manufacturing renaissance with favorable policies and tax implications, all of which may provide tailwinds in 2026. 6,7

Financial investors and strategic buyers in manufacturing will look to make acquisitions where downside is protected. They will steer capital towards companies that have long-term, steady growth, strong customer diversification, IP-protection and barriers to entry, and a broad total available market (TAM). Additionally, as the market adapts to a shift in national priorities politically and globally, we expect investors to value targets in areas that don’t depend on retail consumers but focus on industries such as industrial maintenance or electrical component supplies with unique characteristics that cannot be duplicated by competitors, such as advanced technologies and protected intellectual property. 8,9,10

Demand for manufactured goods has developed an uneven pattern as investors shy from cyclical consumer goods while seeking the stability of the things we can’t live without such as infrastructure, medical devices, critical maintenance components, or staple food production and packaging. The consumer economy appears to be shifting amid declining consumer sentiment. Consumers remained resilient throughout 2025, but in 2026 it would appear spending at the retail level could be in for a slowdown. The term of 2025 was the “K-shaped economy” where wealthier consumers continued to prop up the market while lower-income families may eventually spend less. Toward the end of the year, U.S. unemployment crept up to 4.6%, and consumers said they expected that to rise while consumer sentiment continued to dip. If these expectations hold true, it could mean we’re in for a consumer market built on core goods and a focus on value. 11.12

If manufacturers can’t depend on consumer spending, the opposite appears true for infrastructure spending as the rise of AI and data centers are fueling a boom in demand for electricity juicing markets in electrical grid development, climate-proofing, and network upgrades. Without enough electrical power available, some in tech are even racing to build their own power plants, and that will require plenty of highly engineered manufactured components. 13,14

Another industry to watch with implications that may ripple through the manufacturing sector is domestic mining. Spurred by tariffs and trade disagreements, investors may be eyeing a return to domestic mining, a sector that depends heavily on mechanical equipment that will need to be manufactured, maintained, and regularly repaired. The federal government in November announced a $355 million package to boost domestic mining production. Already there are calls for domestic mining policy changes to boost production for such strategic materials as lithium, cobalt, graphite, and nickel with some telling Congressional leaders homegrown demand may increase 20 to 40 times by 2040. The business of getting materials out of the ground is spurring a boom in high-tech innovation such as the massive, driverless, electric trucks costing millions being tested in North Minnesota iron mines. As demand for domestic raw materials increase, it makes sense to consider not only the equipment that will need to be manufactured, but also the army of manufacturers that will be needed to produce components. In one early example, the mining firm Masabi Metallics in 2025 announced a $110 million spend on upgrades to its truck fleet, including a new 400-ton hauler, one of the largest commercially available trucks. 15,16,17,18

Automation, tech, electrification, trade, and supply chain issues all figure to be part of the picture in manufacturing in the coming year. For investors in the space, manufacturers that focus on the right (i.e., countercyclical) end markets and have a diverse customer base with a large addressable market will be the most attractive. 19

• The Special Purpose Acquisition Company (SPAC) boom of the early ‘20s may have faded, but those deals aren’t done yet. In December, Precision Aerospace & Defense Group agreed to merge with the FACT Acquisition SPAC to go public in a deal with an implied value of about $320 million. The company will trade under the Precision Aerospace & Defense name and includes three divisions: engineering, precision manufacturing, and testing. The company provides design work and production as well as maintenance and repair in the areas of defense, aerospace, and space. 20

• The storied heavy equipment maker John Deere – known for its big green tractors – in May announced the acquisition of Sentera, which makes cameras compatible with major drone platforms and helps farmers gather aerial data to boost farm efficiency and profits. The platform helps analyze plant health, weeds, and other problems. Perched on compatible drones flying at high speeds, Sentera’s optics generate high-res images processed through the company’s FieldAgent software. John Deere reportedly remains open to future drone imagery tech acquisitions. Terms were not disclosed. Sentera will operate as an independent arm under the John Deere umbrella. 21

• At the start of the year, Cummins – a publicly traded heavy equipment powerhouse in engines, components, and power systems – acquired mining and rail power retrofitter First Mode. The purchase, with terms not disclosed, includes First Mode’s hybrid mining and rail product lines and its advanced IP portfolio including hydrogen and battery powertrain capabilities. First Mode’s technology portfolio represents one of the first commercially available retrofit hybrid system for mining equipment. 22

• To close the year, Howmet Aerospace in December acquired aircraft fastener maker Consolidated Aerospace Manufacturing from Stanley Black & Decker in a cash deal for $1.8 billion. Consolidated is a major Boeing supplier. Howmet makes structural components and parts for jet engines as well as aircraft fasteners. The purchase follows two other aircraft fastener deals as the sector ramped up for a projected production boost from both Boeing and Airbus capitalizing on increased demands for air travel. Earlier in the year, TriMas Corporation sold its aerospace division to Tinicum at $1.45 billion and KKR sold its aerospace and defense hardware division Novaria Group for $2.2 billion to Arcline Investment Management. TV’s “Mad Money” talker Jim Cramer called the Howmet/Consolidated deal an “everybody wins” solution and called Howmet “a crackerjack aerospace company.” 23,24

Looking forward, while we’re always mindful of dynamic and unpredictable markets, we believe the future in many domestic manufacturing sectors remains bright. We’re seeing a trend to expand and enhance U.S. domestic manufacturing with Apple announcing a $600 billion investment in U.S. manufacturing capacity while chip maker TSMC announced it’s boosting its U.S. investment to $100 million, and Eli Lilly announced plans to build four pharmaceutical plants in the states. This opens opportunities both in the manufacture of components necessary to build new facilities but also in the manufacture of parts for maintenance and the accelerating digitization of manufacturing including robotics and AI components. As the biggest players invest, the sector creates opportunities for manufacturers all the way down the line that supply the components they need. 25,26,27

As industries increasingly adopts robotics – Amazon alone reports more than 1 million robots in operation – an interesting new trend toward “dark factories” is emerging, factories so automated they don’t require interior lighting, they’re simply full of machines doing the work. But that takes electrical power, too, just as AI-fueled demand for data centers is generating unprecedented electrical needs. Manufacturers who position themselves to support these areas with technological know-how and innovation will benefit. 28,29

One concerning issue that could hold the sector back is the ongoing dearth of skilled manufacturing workers as facilities become increasingly sophisticated. It’s estimated the U.S. could be left with a shortfall of about 2 million skilled workers by 2033 despite six-figure salaries. Potential solutions may lie in both even more robotics integration and a renewed push for workforce development. Companies that maintain a highly trained workforce will be enticing to potential suitors. 30,31

And there are always political unknowns to figure into the big picture facing manufacturing. While no manufacturer can predict or control policy decisions, all can remain aware and prepare. Two big issues that could affect manufacturing in the coming year include the Supreme Court’s ruling on the legality of the administration’s tariffs – and there will likely be consequences for many businesses either way – and the implications of any adjustments to the United States-Mexico-Canada Agreement (USMCA) as the three nations sit down to review the five-year-old replacement to the NAFTA trade agreement in July. At stake could be supply chain disruption, raw materials, and imports of critical components for manufacturing. 32,33

As always, we believe the path to any successful exit beings long before the sale. In a market where buyers are looking for value and sustainable growth, it will be vital for entrepreneurs to focus on developing a broad, dependable customer base, repeatability in their business model, and to cater to non-cyclical industries that can withstand downturns. Manufacturing in the United States is experiencing a renewed focus and appears poised for growth in the right sectors. Those positioned to be resilient to change, serve evolving needs, and demonstrate growth and attractive margins will find no shortage of interested investors and buyers. 8