Capstone Partners, a leading middle market investment banking firm, released its Annual Industrials M&A Report, which shares insights into Public market valuations, the macroeconomic climate, merger and acquisition (M&A) activity, and an outlook for 2026 industry activity. With extensive knowledge and transaction experience, Capstone Partners' Industrials Investment Banking Team provides unique commentary on nine key sectors: Environmental Health & Safety, Flow Control, Heating, Ventilation, and Air Conditioning (HVAC) Equipment, HVAC Services, Industrial & Environmental Services, Metals Manufacturing, Packaging, Precision Manufacturing, and Waste & Recycling.

The U.S. economy endured significant volatility in 2025, shaped by the shifting priorities of the federal administration, an evolving global trade environment, and a Labor market that remained more resilient than expected. The Industrials industry--highly sensitive to trade flows, supply chain stability, and capital investment cycles--saw these dynamics create both operational challenges and strategic opportunities. Aggressive tariff expansions in early 2025 affected most major trading partners and several product-specific categories, immediately impacting input costs, cross?border manufacturing, and material sourcing decisions. However, incremental adjustments through selective trade agreements and regulatory clarifications provided some relief. Many elevated tariffs have remained in place pending further negotiations and legal review, leaving industrials companies navigating a cost structure that is more volatile and less predictable than in prior cycles. As a result, manufacturers have grown increasingly accustomed to operating in an environment of geopolitical and macroeconomic unpredictability, maintaining production, capital planning, and workforce investments even as conditions continue fluctuating. Concerns have persisted around long-term trade stability, demand variability, and pricing pressure, but the industry has largely adapted to what is now viewed as a new economic normal.

In 2025, the U.S. economy delivered a mixed but stabilizing backdrop for dealmakers and investors, characterized by moderating inflation, steady growth, and improving financial conditions. Real gross domestic product (GDP) expanded by approximately 2.2% for the year, supported by resilient consumer spending and a rebound in manufacturing activity despite ongoing global trade frictions, according to Bureau of Economic Analysis (BEA).1 The Consumer Price Index (CPI) for all items rose 2.7% on average in the last twelve months (LTM) for December 2025, according to the U.S. Bureau of Labor Statistics (BLS).2 The Personal Consumption Expenditures (PCE) price index averaged 2.8% for the year through November 2025, signaling progress toward the Fed's long-term target of 2%, according to the BEA.3 These trends were reinforced by three interest rate cuts in late 2025, which have continued to ripple through Credit markets, lowering borrowing costs and improving liquidity for corporate borrowers. Financing conditions improved markedly, with leveraged loan margins tightening and credit availability expanding, creating a favorable environment for strategic and financial buyers.

Industrial and manufacturing indicators reflected caution in the economy with optimism for the year ahead. Manufacturers' new orders rose 5.4% year-over-year (YOY) in November, driven by durable goods and infrastructure-related projects, while U.S. industrial production grew at an annual rate of 0.7% in 2025, reversing prior declines and underscoring renewed momentum in capital-intensive sectors, according to the Fed.4 Commodity-linked industries, however, faced headwinds from price volatility and global supply chain adjustments. On the labor front, the unemployment rate ended 2025 at 4.4%, slightly higher than 2024's 4.1%, as hiring slowed in cyclical sectors of the economy, according to BLS.5 Producer prices continued to rise, with the Producer Price Index (PPI) increasing 3% in 2025, reflecting sustained pricing power alongside supply chain improvements that helped manufacturers and industrial operators stabilize margins, according to BLS.6

Also included in this report:

-- How M&A volumes and Public market valuations in the Industrials industry fared in 2025.

-- Which sectors outperformed the broader Industrials industry and are poised to garner buyer interest in 2026.

-- A message from Capstone Partners' Head of Industrials Investment Banking, 2026 Industrials and North America M&A Expectations, and insights into Capstone's 2025 Middle Market Business Owners Survey.

-- What trends are driving M&A activity across the Industrials industry and a breakdown of each of the nine highlighted sectors.

To access to full report, click here.

ABOUT CAPSTONE PARTNERS

For over 20 years, the firm has been a trusted advisor to leading middle market companies, offering a fully integrated range of investment banking and financial advisory services uniquely tailored to help owners, investors, and creditors through each stage of the company's lifecycle. Capstone's services include M&A advisory, debt and equity placement, corporate restructuring, special situations, valuation and fairness opinions and financial advisory services. Headquartered in Boston, the firm has 300+ professionals in multiple offices across the U.S. With 12 dedicated industry groups, Capstone delivers sector-specific expertise through large, cross-functional teams. Capstone is a subsidiary of Huntington Bancshares Incorporated (NASDAQ: HBAN). For more information, visit www.capstonepartners.com.

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SOURCE Capstone Partners

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