Outlook 2025: Industrials

As we head into 2025, we're seeing many reasons for continued strengthening in the M&A and private capital markets. Over the past year, there has been steady improvement in the rate environment, the GDP outlook, consumer spending and financial health, and corporate earnings.

Against this backdrop, we believe 2025 will see ongoing growth across several subsectors within industrials, and we're excited for the opportunities to come. See our perspectives on the overall M&A and private capital markets.

Industrials: Macro Trends, Broad Appeal

"Despite some pockets of softness across the industrials landscape, the market's strong fundamentals remain intact," says Tim Webb, a group head and managing director. "Several powerful trends are also generating growth potential, such as onshoring and nearshoring, aging infrastructure, more focus on operational efficiency, a need for sustainable solutions, and increasing technology adoption."

With these tailwinds and a steadily improving macroeconomy, high-quality industrials businesses will continue to drive growth and capture strategic buyer and investor attention. Here, we discuss a selection of client engagements exemplifying this dynamic.

Engineered Equipment, Products & Components: Critical to a Changing World

Onshoring and nearshoring, electrification, investments in outdated infrastructure and technology, and a greater emphasis on environmental factors and workplace safety are driving demand for a wide range of engineered equipment, products, and components.

This is benefiting businesses like our client Marshall Excelsior Company, which supplies highly engineered flow control components for transportation, storage, and use of liquified petroleum gas and other industrial gases. Likewise, Insulation Technology Group's electrical insulation solutions are crucial components for electric infrastructure, preventing the unintended flow of electricity to grounded elements and ensuring the safety and efficiency of the electrical grid. NSI Industries is another prime example of the growth opportunity in electrical components. As a scaled manufacturer and supplier of electrical connectors, fittings, and wire management products, NSI continues to capitalize on increased electrical grid investment and data center growth.

Industrial Technology: Innovating Across Industries

As businesses and communities around the world steadily seek the many benefits of more advanced technology, a broad and diverse set of industrial technology companies are answering the call.

For instance, we advised Mott Corporation, which designs and manufactures sintered porous material structures and flow control solutions. It solves highly complex engineering challenges by co-innovating with technical brands and OEMs in dynamic markets including semiconductor, energy, water, and space. The extremely tight tolerances of Mott's products and the semi-consumable nature of its offerings make it especially appealing to investors.

Test and measurement solutions are also playing a crucial role in many industries, enabling companies to meet code and regulatory requirements while complying with health, safety, and environmental standards. Plus, they're instrumental in supporting innovation and improving system performance. In this area, Raptor Scientific, another recent client, garnered strong investor interest because it meets the needs of diverse and attractive defense, space, and aerospace end markets. The company provides complex test and measurement solutions vital to the technological advancement of the U.S. and its allies.

Meanwhile, several themes are driving growth for solutions across the data center and electrical infrastructure markets, including data center expansion, a greater need for computing power, and higher demand for digital interconnectivity. We worked with Salient which exemplifies this opportunity as an original equipment manufacturer of custom switchgear and industrial controls that safeguard critical operations in data centers and other attractive end markets. The company's design, engineering, and manufacturing capabilities deliver value to its customers by meeting unique specifications in technical and increasingly regulated applications.

Packaging: Universality, Diversification, and Innovation

The packaging sector also generates broad investor interest due to its end-market diversity, widespread applications, and nondiscretionary demand. Packaging remains a critical differentiator that integrates brand awareness, technology, product security, automation, and efficiency, and leading packaging companies continue to innovate while striking a balance between performance, functionality, and sustainable practices. As the macroenvironment sees ongoing strengthening, there will continue to be exciting investment opportunities for companies exposed to all parts of the packaging value chain.

For instance, Harris Williams client CONTENUR provides waste storage solutions, including designing and manufacturing containers and litter bins, with market-leading positions in Europe and South America. Waste containerization is a key element of the circular economy, which is seeing higher demand due to favorable macroeconomic and demographic trends and worldwide regulatory changes intended to increase recycling rates. The company's global footprint and local presence allow it to offer a comprehensive, customizable product portfolio and suite of complementary services that are targeted directly at its customers' needs.

Another example is our client AGR International, which delivers quality and process control technologies to global beverage packaging customers, helping ensure quality, productivity, and sustainability goals are met. AGR is also well positioned to capitalize on sustainability tailwinds through patented technology that enables recycled materials in manufacturing.

Building Products & Materials: Building on a Strong Foundation

While macroeconomic uncertainty tempered residential and commercial construction activity in 2024, we expect these sectors to gain momentum in 2025. The rate environment and consumer confidence are normalizing, alongside pent-up demand from an underinvested and aging U.S. housing stock. We also anticipate that areas finding success—such as infrastructure, onshoring, data centers, and the Southeast region—will continue to see strong secular tailwinds, attracting both construction activity and M&A investor interest.

Our client H.B. Fuller's Flooring business, for example, captured investor attention as a provider of adhesives, grouts, and mortars for commercial and residential flooring applications. The business offers a comprehensive suite of flooring preparation and adhesive solutions across all flooring types, including tile, stone, wood, carpet, and resilient flooring, while delivering significant value to customers through leading technology and innovation.

Harris Williams also advised on an equity recapitalization of Covia Holdings LLC, a multi-asset holding company, on behalf of entities managed by a key shareholder. Covia is a leading provider of specialty material products serving as critical input to a diverse set of end markets.

In addition, we worked with Supreme Cabinetry which manufactures premium, semicustom kitchen and bath cabinets and vanities through its two brands, Dura Supreme and Bertch. With a diversified product portfolio and myriad customization options, Supreme has become a trusted partner to a national network of dealers. Its classic handcrafted cabinetmaking is backed by state-of-the-art technology and vertically integrated manufacturing capabilities. The company's team, infrastructure, and capacity investments position Supreme for continued expansion.

Chemicals & Specialty Materials: A Return to Normalized Conditions

Following a drawn-out period of supply chain volatility, the chemicals and specialty materials market appears poised for more normalized supply and demand conditions. In addition to helping stabilize performance trends, this shift will allow buyers and sellers alike to better understand pricing and margin durability—a recurring diligence hurdle since COVID. Given these dynamics, along with increasing urgency from financial sponsors to return and deploy capital, we expect M&A activity to accelerate throughout 2025.

Importantly, the strategic value of quality assets in the space remains strong despite some challenging M&A dynamics, as evidenced by the relative proportion of strategic sales in 2024. Various secular tailwinds, including pent-up demand for infrastructure spending, the need for clean water, and material conversion toward more sustainable inputs, continue to drive buyers to look beyond temporary noise.

A great example is recent client UW Solutions, a specialty coatings company that's well positioned to capitalize on long-term demand drivers. UW is a vertically integrated manufacturer of branded coated substrates, specializing in the formulation of coatings and its proprietary application process. The company is aligned with many attractive industry tailwinds, including rising adoption of automation equipment and robotics, increasing demand for last-mile logistics, and growth in photographed images.

Looking Forward

Several trends are generating growth opportunities throughout industrials, including manufacturing onshoring and nearshoring, infrastructure aging, a heightened focus on operating efficiency, a need for sustainable solutions, and increasing technology adoption.

"Private equity groups, strategic buyers, and infrastructure funds looking to put capital to work in the industrial sector will continue to have multiple options to explore," says Jason Bass, a group head and managing director. "We're excited to see how worldwide dynamics will create long-term value-creation potential for our clients in 2025 and beyond."

Learn more about the Harris Williams Industrials Group.