Global Industrial 2025 Mid-Year Update
Baird Delivers a Strong 1H and Sees Growing Momentum
Our Global Industrial Group entered 2025 with a record backlog of transactions and expectations for an exceptional year. The uncertainty that emerged from the Liberation Day tariff announcements necessitated we re-evaluate the timing and process design on a number of impacted transactions. Our team navigated these unprecedented circumstances to guide our clients through 28 successful transactions, representing over $21.5 billion in value in 1H.
While many uncertainties remain, we believe 2H represents an even more attractive environment to pursue transactions for high-quality businesses for the reasons described below. We are excited about our current transaction velocity and the high levels of engagement we are seeing in the market.
- 20 Signed or Closed Industrial M&A Transactions
- $17.5 Billion in M&A Transaction Value
- 8 Public and Private Capital Market Transactions, Raising $4 Billion of Capital
- 2x Baird Multiple Premium vs Broader Industrial Market
Key Themes for 2H 2025
The following trends give us additional optimism for the global industrials market in 2H 2025:
Buyer Demand from All Corners of the Market is Exceptionally Strong
The first half of the year proved that strategics are aggressively deploying capital with 66% of industrial transactions closing with a strategic buyer, up from 62% last year. Rapidly shifting competitive landscapes, advances in technology, relatively low organic growth rates, healthy balance sheets and compelling synergies are driving management teams and boards to invest heavily in M&A.
While it has been harder for sponsors to compete in this environment, many PE firms are significantly behind in their fund deployment schedules and are intensifying their efforts to make investments in the second half of 2025. Moreover, with the multi-year record influx of direct lending capital, financing markets are wide open and competitive, facilitating sponsor-led deals.
This combination of interest is creating an ideal landscape for sellers, particularly for those high-quality businesses that are successfully navigating the complex macro-economic environment and demonstrating strong financial resilience.
Macroeconomic Backdrop is Increasingly Constructive for Deal Making
While the noise from tariffs continues to emanate from the White House, management teams have developed strategies to assess tariff risk potential and mitigate their impact. This evolution in thinking has enabled transactions with manageable tariff risk to progress smoothly.
Moreover, there are some very favorable factors driving confidence in deal making:
- Corporate earnings have been highly resilient.
- The probability of recession is considered low.
- Inflation seems to be under control for the time being.
- Interest rates are stable with expectations for modest declines over the next year.
- The VIX has returned to stable levels and equity markets are at all-time records.
- The One Big Beautiful Bill Act (OBBBA) brings meaningful tax relief and capital deployment incentives.
- The Trump Administration’s deregulation agenda is pro-growth.
- The European market is viewed as having strong growth potential.
We believe these trends will support deal marking for the foreseeable future.
Deglobalization is Creating Significant Opportunities for the Industrial Markets
The short-term headwinds from deglobalization, including supply chain disruptions and tariffs, have the potential to translate into long-term tailwinds for global industrial companies, ushering in a period of historically high growth. The requirement for local manufacturing around the world catering to local demand will spur significant investment in industrial machinery and equipment. We have seen many of our clients already shifting to in-region-for-region manufacturing strategies, relying heavily on highly automated equipment. It may take a few years to be fully implemented, but the duplicated global manufacturing capacity should create a multiplier effect on investment.
Exciting Secular Trends are Benefiting the Industrial Markets
The convergence of the industrial and technology sectors is accelerating, with companies actively evaluating industrial-tech integration and pursuing targets in areas like AI, machine learning, IoT and SaaS. These technologies are utilized to optimize production, enhance predictive maintenance and improve supply chain visibility. The deployment of new technologies is already driving significant growth in certain areas like industrial cybersecurity, nuclear energy, electrical grid infrastructure, data center cooling, drone/electronic warfare systems, satellite/RF communication and rare earth minerals, to name a few.
Select 2025 Baird Industrial Transactions
Baird’s recent transaction momentum sets a strong tone for the rest of 2025. Connect with our industry-leading team to explore opportunities in your coverage area.
