In a patchy European M&A market, dealmaking in industrials and chemicals is one of the bright spots.

The sector ranked as the biggest EMEA industry by deal value through the first half of 2026, generating €65.83 billion in deals according to Deal Drivers: EMEA HY 2026, more than a fifth larger than TMT, the next largest sector by value.

The sector is set to remain a primary driver of deal value through the second half of the year, registering 459 “for sale” stories according to Mergermarket data, more than any other industry.

Industrials companies serving stable end markets, such as energy and infrastructure, or operating in high-value specialist niches, are attracting steady interest from corporate and private equity dealmakers and trading at high single-digit Ebitda multiples and above, according to La Salle.

Automation and AI drive deals

M&A has served as an important strategic tool for industrials companies to move up the technology curve and embed automation and AI into their operations, taking advantage of anticipated growth in physical AI and robotics.

Japanese technology investor Softbank, for example, acquired the robotics arm of Swiss company ABB in a US$5.4 billion deal as part of its strategy to deepen capability in robotics, data centers and chipmaking; and KKR won a bidding war to take private UK-listed Spectris, a maker of scientific instruments used in industrial automation, for £4.8 billion.

AI is also driving dealmaking at a more fundamental level, supporting M&A in hard assets that provide infrastructure to generate and transmit the energy required to power AI computing demand. Partners Group, for example, is investing US$1 billion in UK-based AVK Power Solutions, a provider of power infrastructure and “behind the meter” energy generation for AI infrastructure and data centers in Europe.

Geopolitics shapes demand

M&A in European industrials hasn’t only been driven by purely commercial factors and has also been shaped by reconfiguring geopolitics and macroeconomics.

Investment in the European chemicals sector is a case in point. The sector has faced multiple headwinds in recent years, ranging from high energy prices and low-cost imports from China to softening global demand. The closure of the Strait of Hormuz, however, has curtailed Asian supply and increased prices and margins, to the benefit of European players.

Corporates such as UK chemicals group Ineos, which has invested more than €400m to build up a portfolio of equity stakes in its European peers, according to FT reports, believe the European market is undervalued and see an opportunity to invest in the industry at attractive entry valuations.

The ongoing war in Ukraine, escalating conflict in Iran and shifts in US defense policy, meanwhile, are supporting surging investment in strengthening Europe’s defense-industrial capacity.

British defense company Cambridge Aerospace, for example, a maker of missile and drone interceptor technology, has recently raised a US$300 million funding round valuing the business at US$3.4 billion.

Defensive deals

M&A in industrials, however, isn’t only about growth. Elevated interest rates and energy prices, as well as weak domestic demand, have led to corporate carve-outs, and in some cases turnaround deals, as industrials companies across the continent right-size production capacity and focus on their stronger business lines.

Vast industrial overcapacity in China, meanwhile, is adding to these headwinds, as Chinese automotive and manufacturing companies seek to increase exports of vehicles and goods that exceed saturated domestic demand into European markets, putting pressure on local European production capacity.

This is driving a wave of consolidations and divestitures across the industrials sector, according to Barclays, as corporates offload non-core assets and join forces to consolidate overlapping capacity and improve manufacturing asset usage.

Looking ahead, investment in technology and strategic geopolitical objectives will support growth-oriented European industrials M&A, but cost pressures and an uncertain demand outlook will continue to drive defensive dealmaking too.