European manufacturing and distribution M&A: H1 2026 deal trends
M&A activity eases as geopolitical uncertainty affects investor confidence
1,464
deals completed
across Europe
20%
The UK led European M&A activity, with 291 deals, accounting for 20% of deals
31%
of UK deals were
PE backed
Our view of the European manufacturing and distribution M&A market
After a reasonably strong 2025, and against the backdrop of geopolitical uncertainty during the first half of 2026, we are not surprised to report on a slowdown in M&A activity in the European manufacturing and distribution sectors. A total of 1,464 deals were completed in the last six months across Europe, which represents a 22% decrease from the 1,865 deals we recorded in the second half of 2025, and a 28% decline on the same period last year.
Rising energy costs, margin pressure and weaker economic conditions across Europe have weighed on business confidence and investment activity. However, challenging periods often accelerate consolidation, and previous cycles of disruption have typically been followed by a recovery in deal activity as conditions stabilise.
Investor sentiment in 2026 was no doubt affected by the outbreak of the conflict in the Middle East, and the impact this was expected to have on both the global and the European economies. While M&A activity was down across all European regions, some fared worse than others. Scandinavia and the UK recorded only 15% and 16% declines in activity, respectively, whereas the Netherlands saw a 29% fall in the number of deals completing, and the worst performer, Italy, reported a 33% decline in transactions.
The UK remains Europe’s busiest individual country for M&A activity in the manufacturing and distribution sectors, with its 291 completed transactions in H1 2026 accounting for 20% of Europe’s total.
Deal volume by region
“The real trend isn’t fewer deals – it’s smarter investment. Capital is becoming increasingly selective, favouring resilient businesses with scale, operational excellence and sustainable competitive advantages. These are the foundations of long-term value creation and the qualities that will define tomorrow’s market leaders.”
Marc Fecher, Partner and Chair of Corporate Finance
Foreign backing for M&A in the UK manufacturing and distribution sectors
Of the 291 completed M&A transactions in the UK in H1 2026, 115, or 40%, involved investors or acquirers from overseas, which is a 23% decrease on H2 2025’s 150 completed transactions. H1 2026 saw £6.7 billion invested in the UK’s manufacturing and distribution sectors by overseas investors, compared with £10.1 billion in the last six months of 2025.
Despite this dip, the consistent international investment in the UK underlines the opportunities and attractiveness of the British market.
Number of UK deals with foreign investors and capital invested
In H1 2026 we saw a number of high-profile, cross-border deals worth in excess of £1 billion.
Notable foreign- backed deal
In January, Dublin-headquartered Greencore, which has the vast majority of its production and customer base in the UK, completed its £1.2 billion acquisition of fellow LSE-listed food producer, Bakkavor. The merger created the UK’s leading fresh convenience food powerhouse, with approximately 28,000 employees across 36 manufacturing sites in the UK and US.
LSE-listed engineering conglomerate, Smiths Group, completed two significant divestments in H1 2026, with the sale of its threat detection arm, Smiths Detection, to CVC Capital Partners for £2 billion and electronic connectors business, Smiths Interconnect, to Molex Electronic Technologies, a Koch company, for £1.3 billion. These transactions mark the completion of the strategic repositioning announced by Smiths Group in January 2025, transforming the company into a premium industrial engineering business focused entirely on flow management and thermal solutions.
In January, Eaton Corporation officially completed the acquisition of Cheltenham-based Ultra Precision Control Systems from the Cobham Ultra Group for $1.55 billion. Ultra PCS designs advanced electronic controls, sensing, and data processing solutions primarily for safety and mission-critical aerospace and defence markets.
Aerospace and defence deal volumes have steadily increased over the last few years, and deal volumes are now significantly higher than they were in 2022. This is a result of the conflicts in the Ukraine and the Middle East, and the increasing emphasis by European governments and NATO members on bolstering their defence capabilities, particularly in the light of US threats to reduce their coverage of Europe.
Foreign investment in the UK
Over the last five years, European and US acquirers have accounted for the bulk of UK M&A transactions with overseas buyers. In H1 2026 we counted 67 UK M&A transactions involving European acquirers and 45 US acquirers. While overall transaction numbers have declined, in line with the market, both European and US acquirers have increased their share of the deal-doing.
We believe this trend has been accelerated by the introduction of the National Security and Investment Act 2021 (NSIA), which has generally led to increased government scrutiny of non-EU and non-US acquirers, where target companies supply products or services, directly or indirectly, to 17 highly sensitive sectors of the UK economy.
In H1 2026, Europe accounted for 56% of overseas-backed UK M&A deals, marginally up on the 55% we saw in the prior period, while the US saw its share increase from 33% in H2 2025 to 38% in H1 2026.
Foreign investment by region
Spotlight on major sectors
While M&A activity was generally down across the European manufacturing and distribution market, some major sectors performed better than others in H1 2026. The materials and resources sector was our best performer, with no decline in activity – we recorded 147 M&A transactions in this space, exactly the same number as in H2 2025. Consumer goods remained the largest sector overall, with 188 transactions completing in the first half of this year but saw the steepest decline in activity, a 22% decline when compared with the 240 deals we recorded in H2 2025.
Activity in the materials and resources space was underpinned by continued demand for critical minerals, supply chain localisation, infrastructure and defence investment, and acquisitions supporting the transition to green energy as well as energy independence. In contrast, consumer goods transactions were more heavily affected by weaker consumer confidence, softer discretionary spending and greater uncertainty around future earnings, leading many buyers to adopt a more cautious approach.
Fundamentally, manufacturing and distribution businesses rely heavily on the international movement of goods, more so than people-based businesses. The tariff trade war followed by the actual conflict in the Middle East has created an extremely volatile operating market which in turn impacts M&A activity, as companies are trying to get back to an even keel before allocating capital for M&A.
European deals by major sector
Trending: materials and resources
The materials and resources sector continues to benefit from long-term structural demand driven by the transition to green energy and the quest for industrial resilience. European governments and corporates remain focused on securing supplies of critical raw materials used in batteries, electrification, semiconductors and defence manufacturing. Examples include: copper and aluminium for electrification and grid investment; lithium, nickel and rare earth supply chains; and industrial minerals supporting semiconductor and advanced manufacturing. As a result, buyers are often pursuing acquisitions for supply security rather than purely financial returns.
In H1 2026, Dutch group AMG Critical Materials announced the acquisition of two German businesses designed to secure its access to resources – Zinnwald Lithium, in which it already had a minority stake; and AURA Technologie, which recovers molybdenum from spent catalytic converters.
Across Europe, industrial resilience has become a strategic priority. Following several years of supply chain disruption, governments have continued to encourage investment in domestic production capacity and critical materials. This has encouraged vertical integration by manufacturers and investment in regional supply chains.
An example of this is the announcement in June by US-based rare earths miner, Energy Fuels, that it was acquiring German business VAC, a manufacturer of high-performance permanent magnets used in EVs, wind turbines, robotics and defence. The acquisition integrates mining, processing and magnet manufacturing within one supply chain. At the same time, Energy Fuels stated that it wished to establish an integrated US-European rare earth and magnet supply chain that reduces dependence on China for critical materials.
One of the biggest deals in the materials and resources space was the completion of The Carlyle Group’s acquisition of BASF’s German-headquartered coatings and surface treatment division, which is now known globally as Surventis. The acquisition had an enterprise value of €7.7 billion, and the deal received the necessary regulatory approvals and officially completed in June. BASF retained a minority stake in Surventis, which is now majority owned by funds managed by The Carlyle Group in a strategic partnership with the Qatar Investment Authority.
In January, Calders & Grandidge, a timber business based in Boston, Lincolnshire, was acquired by Swedish specialist timber group, Rundvirke. Calders & Grandidge was originally founded in 1820 and had been a subsidiary of Saint-Gobain since 2000. The acquisition marks Rundvirke’s first purchase outside Sweden and allows it to establish local production in its most important export market, the UK. The deal was subject to regulatory approval from the UK’s CMA, which officially cleared the transaction in late 2025.
Of the 291 UK M&A transactions we recorded in H1 2026, 31% involved private equity investment, either directly or via an existing portfolio company. While this is only a small increase on the 30% recorded in H2 2025, it is the highest percentage we have recorded since 2021.
We had anticipated that PE houses, which have seen their hopes for further UK interest rate cuts recede because of the Middle East situation, might scale back their activity in 2026, but thus far it appears that their appetite for deals is holding up better than that of the trade acquirers.
Private equity investment in UK deals
Of the 291 UK M&A transactions we recorded in H1 2026, 31% involved private equity investment, either directly or via an existing portfolio company. While this is only a small increase on the 30% recorded in H2 2025, it is the highest percentage we have recorded since 2021.
We had anticipated that PE houses, which have seen their hopes for further UK interest rate cuts recede because of the Middle East situation, might scale back their activity in 2026, but thus far it appears that their appetite for deals is holding up better than that of the trade acquirers.
Percentage of PE-backed M&A deals
Notable UK PE-backed deals
A public-to-private transaction that completed in March was US PE house One Equity Partners’ £251 million all-cash acquisition of AIM-listed Kitwave Group, a wholesale distributor providing food, drinks and other consumables to food-service and retail customers in the UK.
In January, specialist technology investor, Battery Ventures, supported its portfolio company Velaris in buying Markes International. Headquartered in Bridgend, Wales, Markes is a leading provider of advanced technologies used in gas chromatography and mass spectrometry.
Trends in private equity: corporate carve-outs
A notable trend within the private equity market has been the growing prevalence of carve-out transactions, whereby a parent company, often a listed corporate, divests a subsidiary or non-core business to a private equity investor. These transactions enable companies to unlock value without undertaking a full disposal of the group and can help narrow the valuation discount applied to the remaining business. The proceeds generated may then be redeployed to accelerate strategic growth initiatives, strengthen the balance sheet, reduce debt, or be returned to shareholders through capital distributions.
In January, fitted kitchen specialists, Magnet, Gower and CIE, were acquired by Alteri Investors, a UK-headquartered PE firm. Magnet, which manufactures most of its kitchens at its site in Darlington, had been part of the Swedish Nobia Group for more than 20 years. As Nobia strengthens its focus on its core Nordic markets, Alteri’s acquisition is expected to give the UK business the dedicated focus and backing needed to accelerate its next phase of growth.
In May, LSE-listed Hill & Smith, a provider of solutions that enhance the resilience of vital infrastructure and the built environment, announced the disposal of Hill & Smith VRS, its permanent steel road barrier business, to PE house ThreeSixty for £5.25 million.
In March, Aberdeen based SES Energy acquired Chemical Injection Utilities and its corrosion monitoring divisions from ICR Integrity. The transaction marked the first major acquisition for SES Energy under new ownership by global PE house Davidson Kempner. ICR said that the divestment marks a significant milestone in ICR’s strategic journey, enabling the business to sharpen its focus on its core technology-led repair solutions and accelerate long-term, sustainable growth.
In June, Moore Kingston Smith advised Asteria Group, which is backed by private equity firm Waterland, on its acquisition of Mercian Labels, based in Burntwood, Staffordshire.
Founded in Belgium in 1985 and now headquartered in Gullegem, Belgium, Asteria is a leading European labels and packaging printing group. Its recent UK acquisitions include ProPrint Group, Label Makers and Label World, which were also advised by Moore Kingston Smith.
Crude oil prices affecting the sector
Escalating tensions involving Iran have pushed crude oil prices sharply higher, with Brent crude rising above $94 per barrel as markets price in the risk of supply disruptions through the Strait of Hormuz, a critical route for global energy shipments. Moore Kingston Smith explained how this crisis is affecting manufacturing and distribution businesses and how to react.
For European manufacturing and distribution businesses, higher oil prices translate into increased transportation, logistics and energy costs, placing further pressure on margins and working capital requirements. As a result, some acquirers may become more cautious on valuations and deal timing, particularly in energy-intensive sectors, while sellers could face greater scrutiny around profitability forecasts and resilience to cost inflation. Nevertheless, well-positioned businesses with strong pricing power, diversified supply chains and robust operational efficiencies are likely to remain attractive M&A targets despite the heightened uncertainty.
Crude oil WIO USD per barrel
*Source: Trading economics
This is combined with the fact that the UK is now one of the highest-cost locations for industrial electricity in the developed world. This is not a marginal issue. For energy-intensive operators, it is a board-level competitiveness issue.
Average non-domestic electricity prices in the EU27 plus UK including taxes / subsidies
*Source: Department for Energy Security and Net Zero (DESNZ). International non-domestic energy price statistics: Full Fact analysis of 2024 IEA industrial electricity price comparisons.
“UK manufacturing has proven its resilience through higher energy costs, supply chain disruption and geopolitical uncertainty. If the UK can deliver secure, internationally competitive energy prices, today’s manufacturing businesses could prove significantly undervalued, with lower costs unlocking stronger profitability, investment and valuations.”
Marc Fecher, Partner and Chair of Corporate Finance
Outlook
While M&A activity across the European manufacturing and distribution sectors remained subdued during the first half of 2026, the underlying drivers of dealmaking remain intact. Although geopolitical tensions, macroeconomic uncertainty and elevated financing costs continue to weigh on boardroom confidence, corporates and financial sponsors are well capitalised and continue to seek opportunities to strengthen strategic positioning, enhance operational capabilities and optimise portfolios. As valuation expectations between buyers and sellers continue to converge and financing markets remain supportive for high-quality assets, transaction activity is expected to improve gradually over the remainder of the year.
Looking ahead, strategic themes are likely to play an increasingly important role in shaping M&A activity. Supply chain resilience, industrial automation, digitalisation, energy transition and portfolio rationalisation are expected to continue driving acquisitions, particularly in subsectors exposed to infrastructure investment, critical materials and industrial technology. Private equity investors are also expected to remain active, with significant levels of uninvested capital supporting demand for attractive assets, particularly through public-to-private transactions and corporate carve-outs. While the pace of recovery is likely to remain measured, particularly if conflict in the Middle East continues in earnest, these structural drivers should provide a solid foundation for a gradual improvement in deal activity as market confidence strengthens.
“Periods of uncertainty rarely eliminate dealmaking; they simply change its shape. Consolidation is often inevitable in less robust economic environments, as businesses pursue market share gains and operational efficiencies to restore profitability and improve margins. The businesses with the clearest strategic objectives will be those best placed to drive the next wave of M&A activity.”
Jeremy Read, Head of Manufacturing, Moore Kingston Smith
Authors
How we help manufacturing and distribution businesses
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Methodology
In compiling our deal tracker we use Pitchbook, an international financial data provider that gives access to comprehensive data on the private and public markets. Moore Kingston Smith has analysed completed M&A transactions involving European and UK based manufacturing and distribution companies from 1 January 2026 to 30 June 2026 to identify the trends in this report. This research aims to capture all transactions by European and UK companies that fall within the manufacturing and distribution sectors. Inevitably there will be transactions that have taken place but have not been captured.
A note on methodology
Previous editions of this report have dealt with many different types of transactions in the European manufacturing and distribution sectors, amalgamating M&A deals with fundraisings, including minority venture capital raises. We have decided going forward to focus solely on M&A transactions, so the historical numbers quoted in this report will vary from those in our previously published reports.
