2025 Industrials M&A Outlook

There are a number of key tailwinds and macro dynamics that are driving growth and expansion for U.S. industrial services companies.  Buoyed by these growth factors, and a record amount of “dry powder” investment capital ready to be deployed by financial sponsors, 2025 is shaping up to be a busy M&A year for high quality industrial growth companies. Our Industrial Services team at Texas Capital has decades of experience in advising businesses across all of their strategic and capital needs, including debt financings, minority or majority equity raises, and full sale transactions.  Some of the key macro growth themes we are currently tracking include:    

Infrastructure Refresh And Expansion

• Infrastructure Investment & Jobs Act (IIJA) and the Science & CHIPS Act. The Federal Government has allocated $1.2 trillion to the IIJA and $53 billion toward the Science & CHIPS Act. This federal spending is aimed at restoring the nation’s infrastructure and bolstering its semiconductor manufacturing capabilities.
• Ongoing housing shortage in the U.S. The rise in interest rates between 2022 and 2024, in part, sidelined real estate development. A lower and stable interest rate environment is expected to drive housing activity in the coming years².

Rise Of U.S.-Based Manufacturing 

• Moving the supply chain closer to home — nearshoring and onshoring. Given the rising costs of producing goods in multiple markets, the prospect of tariffs, and potential for geopolitical instability, businesses have been looking to bring production closer to home, where possible. Land crossings with U.S. neighbors are increasing in volume and importance. Certain manufacturing functions are also coming back to the U.S. due to technological advancements or requirements in order to do business with certain governmental entities.  
• Build America Buy America Act (BABA). The Trump administration has signaled its prioritization of U.S.-based businesses, supporting a resurgence in the BABA act. Similarly, international and domestic players with international supply chains and manufacturing may look to bolster their U.S. presence to avoid the potential impact of tariffs and other disruptions, leading to further investments inside the U.S. 

Artificial Intelligence (AI) / Machine Learning (ML) Revolution

• An aging electrical grid facing record demand. With an estimated 70% of the nation’s electrical transmission lines over 25 years old, infrastructure upgrades are essential to meet the estimated 16% growth in demand for the U.S. electrical grid over the next five years (more than triple the estimate in 2023)³ . Also, as AI continues to evolve, data centers have become critical infrastructure, with a corresponding increase in electricity demand to meet AI’s required computing power. As a result, tech companies are seeking to acquire and build infrastructure, technology assets, and service capabilities to support the industry’s growth and energy demand.
• Rise in niche manufacturing and automation. Technological advancements are driving significant manufacturing capabilities back to the U.S., particularly in highly engineered products and advanced manufacturing. Moreover, the increasing adoption of automation and artificial intelligence/machine learning solutions across different sectors of the economy should benefit the broad value chain that provide these services.  

Other Global Trends

• U.S. vs. the world. A sluggish global economic outlook makes a resilient U.S. market stand out as a preferred destination for investments, favoring inbound cross-border M&A opportunities.
• Impact of a bearish outlook on commodities. Absent potential tariff impacts, commodity prices are forecasted to remain flat or fall in 2025.
• Frequency and intensity of natural disasters on the rise. Businesses specializing in environmental services, disaster recovery, infrastructure repair and sustainable technologies stand to benefit from this trend.