During the first quarter of 2026, industrial manufacturers struck fewer deals, however, those deals were far more impactful, according to new research released by KPMG.
The quarter opened with lower deal volumes yet record-high values, as companies doubled down on strategic, capability-driven acquisitions while capitalizing on a favorable dealmaking climate.
“In Q1’26, industrial manufacturing dealmakers showed they’re willing to swing big—but only when the strategic rationale is clear and the terminal value upside outweighs the near-term earning volatility,” says Todd Dubner, principal, advisory—performance transformation, KPMG LLP.
Key takeaways:
· Strategic acquirers and private equity (PE) sponsors alike entered the New Year with substantial capital to deploy, buoyed by an innovation supercycle in areas like artificial intelligence (AI) and electrification.
· Yet, rather than a broad-based surge in dealmaking, the quarter reflected fewer but significantly larger transactions. Those fewer, larger deals pushed deal value to a record high—an outcome driven disproportionately by a single, transformative transaction.
· At the same time, dealmaking unfolded against an unusually volatile economic backdrop. In the short term, expect a period of mild stagflation in the United States, with growth slowing and inflation reaccelerating, driven primarily by energy prices, tariffs on goods, still sticky services inflation, and downstream supply disruptions tied to geopolitical conflict. However, the number of large, high-conviction deals continue to grow. These deals tend to be driven by terminal value assumptions, what is best for the company in the long term, and are accepting volatility in the near horizon. Taking the long view in a more constructive regulatory environment cleared the way for large, complex transactions.
· In summary, the year began with a combination of large, high-impact transactions and a more selective approach to overall deal activity. The quarter’s largest transactions suggest that leading industrial manufacturing companies remain willing to pursue significant acquisitions to support long-term strategic objectives.
· At the same time, lower deal volumes and a focus on targeted capability acquisitions reflect a more disciplined M&A environment, where emphasis is placed on deal quality rather than quantity.
· As 2026 unfolds, IM executives and investors will need to operate in a market defined by fewer transactions, larger commitments, and heightened expectations, requiring clear strategic alignment and thorough execution.
