By Michelle Ritchie, Global Industrials and Services Deals Leader, PwC US
Digitalisation, the energy transition, and AI infrastructure are reshaping industrials and services M&A. In 2026, dealmaker focus will be on driving sharper portfolio choices and targeted investments in innovation and automation.
A convergence of structural pressures and long-duration growth themes is shaping M&A activity across the industrials and services (I&S) sectors in 2026. Labour shortages, geopolitical pressure, and persistent supply chain risk are pushing companies to act by acquiring automation, digital, and productivity-enhancing capabilities. At the same time, investment in infrastructure, defence, and energy systems is strengthening end-market demand in select subsectors, supporting targeted dealmaking despite ongoing macroeconomic and trade uncertainty.
Portfolio reshaping remains central to M&A strategy. Corporates are divesting legacy or non-core operations and reallocating capital towards higher-growth, technology-enabled, and service-oriented businesses aligned with digitalisation, the energy transition, and the build-out of AI infrastructure. Private equity is expected to remain a major catalyst across subsectors, favouring recurring-revenue models, fragmented markets, and buy-and-build strategies that enable rapid scaling, platform expansion, and operational value creation.
While the I&S sector is aligned around these common drivers, dealmaking in each subsector will be shaped by distinct priorities in 2026:
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Aerospace and defence (A&D): Rising global defence spending and geopolitical tension will likely see increased M&A activity across rearmament, components, unmanned systems, space, and aftermarket services, with heightened focus on supply chain resilience and secure sourcing.
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Automotive: Dealmaking remains selective amid overcapacity and capital constraints, with OEMs and suppliers favouring strategic alliances, joint ventures, and targeted acquisitions to advance electrification, software, and autonomous-driving technologies.
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Business services: Private equity-led consolidation continues in recurring, tech-enabled services, with activity expanding into legal, staffing and business process outsourcing, compliance, managed IT, cybersecurity, and audit-driven platforms.
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Engineering and construction: Infrastructure, clean-energy, and data centre investment will support M&A activity in specialty contractors and industrial services, particularly those enabling automation, prefabrication, and higher-value, project-critical capabilities.
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Manufacturing: Portfolio reshaping, reshoring, and AI infrastructure demand are driving selective large-scale deals and bolt-ons in automation, energy storage, and life-sciences-adjacent niches.
