M&A and fundraising in the European manufacturing and distribution sector: H1 2025
European deals up, with investors chasing bigger transactions
Our view of the market
M&A and fundraising activity in the European manufacturing and distribution sector presented a mixed picture in the first half of 2025. Overall deal volumes were up – we recorded 2,704 transactions across the whole of Europe. This represents a 2% increase on the 2,662 deals we counted in the second half of 2024. However, results varied considerably by region. Scandinavia, Germany and the rest of Europe put in strong performances, with deal activity increasing by between 6% and 10% in those territories. In contrast, the UK saw a 6% decline in activity and Italy fared particularly badly, with a 15% fall in the number of completed transactions.
Despite experiencing a decline in the number of deals completing, the UK remains Europe’s busiest country for M&A and fundraising activity in the manufacturing and distribution sector. Its 501 completed transactions in H1 2025 account for 18.5% of Europe’s total.
Transaction activity has undoubtedly been affected by recent economic and geopolitical uncertainty. The Trump administration’s announcement of trade tariffs at the start of the year had a significant impact on the market, as investors felt the tariffs were likely to have an adverse effect on manufacturing businesses. A seesawing stock market, with some US indices experiencing double-digit falls in a day, did not help matters in Q1.
However, as the S&P500 fell, European stock markets delivered their strongest quarterly performance in decades. On 21 March, Germany amended its national fiscal rule known as the “debt brake”, enabling it to borrow substantially to fund investment in manufacturing, infrastructure and defence. This may help to explain the increase in German deals that we saw in H1 2025.
The second quarter of 2025 was less volatile, as the US trade tariffs were largely paused or reduced. Individual countries, notably the UK, were given opportunities to negotiate special arrangements with the US. However, the threat of high tariffs did not disappear completely and, while there remained uncertainty in this area, many deal processes were put on hold.
Deal volume by region
Foreign investment into the UK manufacturing and distribution sector
Of the 501 completed transactions in the UK in H1 2025, 160 involved investors from overseas. The number of deals completing is down on the second half of last year, when we recorded 196 transactions. However, the amount of capital that these foreign investors are committing to the UK has increased enormously. Where H2 2024 saw £2.1 billion invested in the UK’s manufacturing and distribution sector by overseas investors, H1 2025 saw £16.5 billion – the highest amount since the end of the pandemic. Fewer deals are being done but those that are completing involve bigger businesses – presumably held to be safer bets by foreign investors.
Number of UK deals with foreign investors and capital invested
The high total in H1 2025 was undoubtedly skewed by one deal in particular: the acquisition of London-headquartered, LSE-listed, multi–national packaging business DS Smith by NYSE-listed packaging group International Paper, in a deal which attributed an enterprise value of c. £7.8 billion to DS Smith.
Another large UK transaction which completed in H1 was the £3.3 billion acquisition of UK-based, LSE-listed, soft drinks producer Britvic by the Danish brewing group Carlsberg.
As well as the substantial Carlsberg/Britvic transaction, we saw a number of other UK companies operating in the food and drink sectors change hands during H1 2025. Most of these transactions were not cross-border, including the sale of The Real Yorkshire Pudding Co to The Compleat Food Group; the sale of Fiddes Payne’s home-baking business to Scottish ingredients firm Albex; and the sale of Just Egg to Noble Foods. In April, CVC-backed Polish-headquartered Stock Spirits Group snapped up UK-based independent spirits importer The Drinks Company. Jean-Christophe Coutures, CEO at Stock Spirits Group, said: “Expanding into the UK is a pivotal moment for the group. Our vision is to become a leading spirits company in Europe by 2027 and a foothold in the UK is key to achieving this success.”
In terms of where foreign investment is coming from, there have been significant changes in the UK market in 2025. The US still accounts for the bulk of overseas capital invested in the UK manufacturing and distribution sector. However, where 86% of all foreign capital deployed in H2 2024 came from the US, in H1 2025, this had fallen to 65%.
Foreign investment by region
When we look at the number of UK deals involving US investment, this decline is even more apparent. In H2 2024, we counted 131 transactions involving a UK target company and a US investor. In H1 2025, this had fallen to just 63 transactions with a UK target and a US investor. For the first time, we counted more UK transactions involving European acquirers and investors than US ones. As the US pursues protectionist policies, we may be seeing a reduction in funding from US-based investors for UK-based companies.
Foreign investment deal count
Spotlight on major subsectors
After a series of falls throughout 2023 and 2024 for most of the major sectors within the European manufacturing and distribution market, we saw increases across nearly the whole board in H1 2025. Apart from healthcare, where we saw a 9% decline in the number of European transactions completing, every major sector grew. Construction and engineering led the pack, with a 65% increase in transactions.
European deals by major sector
The aerospace and defence sector posted a 60% increase in the number of deals completing in H1 2025, this was largely as a response to geopolitical events. Germany took action in March to beef up its defence spending by amending its debt brake. Other NATO members have committed to increasing the amount they spend on defence, so we expect to see further capital inflows into this sector which should bolster deal activity.
Moore Kingston Smith Corporate Finance advised on two transactions allied to the construction sector in H1 2025. In February, we advised Mactech Energy Group, a specialist recruitment provider of technical workforce, planning process and project solutions engineers to nuclear new-build construction in the UK, on its sale to French nuclear engineering group Assystem.
In June, we helped DBD Distribution, which provides white goods sourcing and installation services to the construction industry, transition to an employee-owned business, thereby enabling a shareholder exit, while securing the company’s future as an independent operation.
Trending: Materials and resources
The European materials and resources sector had a poor 2024, held back by ongoing worries about the strength of the US economy, an economic slowdown in China and relatively high interest rates globally. With interest rates now falling in many major economies, and with China unveiling economic stimulus plans, the macroeconomy is expected to be favourable in the second half of 2025, particularly for Europe. Europe’s trade with the US may well be impacted by tariffs but is expected to benefit from investors viewing European companies more favourably than US-based ones.
The Moore Kingston Smith Corporate Finance team was busy in the materials space in the first half of 2025. In April, the team advised Belgian labelling and packaging solutions firm Asteria Group on the acquisition of Irish company Label World. Asteria is backed by Waterland Private Equity, whose strategic investment has enabled the group to expand through the acquisition of Essex-based Compliance Labelling in 2023 and Dublin’s Label Tech in 2024, both of which deals Moore Kingston Smith advised on.
Private equity investment in UK deals
Most of the UK deals we recorded involved private equity investors, either acting directly or via an existing portfolio company. Private equity remains the fundamental driver of transaction activity in the manufacturing and distribution market. If interest rates start to come down slowly, as predicted, this could boost private equity houses’ activity still further.
When we exclude fundraisings and look at UK M&A transactions in isolation, we see that, while private equity still underpins the market, corporate acquirers account for the majority of deals. Private equity was involved in 47% of UK M&A transactions, up marginally on the 46% we recorded in H2 2024.
Percentage of PE-backed M&A deals
With a large pool of private equity funds having invested in the UK’s manufacturing and distribution market for some years, we are seeing an increasing number of secondary transactions, whereby the original investor looks to realise its investment by selling its portfolio company to another private equity house to begin the investment cycle anew.
One such secondary transaction was NorthEdge’s sale of upholstered furniture and soft furnishings manufacturer the Belfield Group to Blandford Capital. Belfield supplies the UK and export retail, leisure and furniture trade sectors from its sites in North Wales, Lancashire, Derbyshire and Romania and employs nearly 1,000 people, generating revenues of around £85 million per year. Blandford expects its investment to help Belfield Group accelerate its growth plans.
Outlook
Our outlook for the European manufacturing and distribution sector for the remainder of 2025 is cautiously optimistic, with growth in the number of M&A and fundraising transactions expected despite ongoing challenges. Fears that US tariff policies will lead to higher goods prices and a global economic slowdown do not make for a benign investment environment. However, it is the US that investors judge will be worst affected by such policies. In the face of perceived American economic instability, they are increasingly turning their attention to Europe.
In the UK, falling interest rates are expected to help manufacturing and distribution businesses improve their profitability and enhance the ability of private equity to complete leveraged transactions.
At the end of June, the UK government published its new industrial strategy. It identified eight sectors that it believes have the highest potential for economic growth, including advanced manufacturing, life sciences, clean energy and defence. The centrepiece of the industrial strategy is reducing energy costs for big electricity users. Additionally, the government plans to invest in speeding up grid connections to enable new manufacturing facilities to be built and to speed economic growth.
Other measures include increasing finance for the British Business Bank, which will be allowed to take equity stakes in SMEs. While the proof will be in the pudding, the published strategy received a generally warm reception from British business, with the CBI describing it as “credible” and focused “on the areas of the economy where the UK can genuinely compete and win global market share”.
“The European manufacturing and distribution sector is navigating a complex landscape, facing both challenges and opportunities. By focusing on resilience, innovation and sustainability, businesses in this sector can position themselves for growth in the coming years and will be attractive to potential acquirers and investors.” Jeremy Read, Head of Manufacturing, Moore Kingston Smith.
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 transactions by European and UK based manufacturing and distribution companies from 1 January 2021 to 30 June 2025 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 that have not been captured.
