Manufacturing: Q1 2026 Report

We are pleased to present our 1Q 2026 report as we are seeing many signs of a positive expanding manufacturing sector as well as increased M&A activity. The year for manufacturing has started out strong with the Purchasing Managers Index (“PMI”) above 50 for the 3rd month of the year. M&A was strong in the 1st quarter and we are seeing more engagements being signed and more inquiries about individuals interested in selling their business. We expect these trends to continue given the money at funds that need to be put to work and the stimulus from lower taxes and deregulation to kick-in.

Last years announcement of wide spread Tariffs caused uncertainty which slowed down some manufacturing decision making and also M&A activity. At this point the Tariffs have either been settled or factored in. In fact in some cases it is motivating foreign companies to explore acquiring U.S. based manufacturers to help avoid some of this.

We entered the year with optimism for both manufacturing production and related M&A activity and we are seeing this trend thus far. Our thesis is based on:

• The Big Beautiful Bill has many pro-business initiatives such as lower taxes and accelerated depreciation on capital goods.
• Interest Rate Easing
• Tariffs coming off the table or at least being settled which creates less uncertainty and allows businesses to invest knowing what the rules are.
• Private Equity Funds are sitting on mountains of money that needs invested.There is some risk that “Operation Epic Fury” could slow this down due to higher energy costs and uncertainty. However, if this is completed in the next few weeks then we don’t believe this will have long-term effects.

The national association of manufacturers (“NAM”) reported that 75.3% of manufacturers reported a positive outlook which is a 5.4% increase over last quarter. Sales and production are projected to rise 3.8% and 3.5%, respectively, up from the previous quarter’s forecast of 2.8% and 2.4% growth. The NAM survey was conducted February 10th to the 26th, 2026. Additionally, the Purchasing Managers Index (“PMI”) was 53.7% for March also representing an expanding manufacturing sector.

According to the World Economic Forum, 75% of high-performing factories are investing in data-driven, connected platforms to improve real-time visibility and productivity.Agentic AI (AI that can reason and take action) is being adopted for supply chain management and production. Furthermore, 77% of manufacturers plan to increase investments in AI, with 22% looking to deploy physical AI/advanced robots.

Volumes were down but megadeals drove absolute values. Apart from geopolitical turmoil, advances in artificial intelligence that have created ​AI winners and losers shaped the start of the M&A year, driving four of the six biggest deals. Generally, the large deals help trigger sellers to come off the sidelines and follow these trends. We are seeing these early green shoots from new engagements and pitch activity in the advanced manufacturing sector.

Uncertainty regarding policy changes and geo-political risk is pushing manufacturers to design networks that flex by geography, backed by shared data, scenario planning, and resilient supplier partnerships. This is also driving M&A in cases where manufacturers are looking to buy to fill gaps.