Precision Manufacturing Market Update – March 2025

Domestic Industrialization Drives M&A Activity in the Precision Manufacturing Market

The Precision Manufacturing market has been upheld by bifurcated demand for sector metal and plastic products amid recent uncertainty in the broader macroeconomic and geopolitical environments. Merger and acquisition (M&A) activity in the Precision Manufacturing sector has prioritized enhancing production capacity, expanding geographic reach, and integrating advanced technologies. Sector targets have battled a structurally higher interest rate environment since 2020 to combat elevated inflation, which has challenged more than half (62.5%) of Industrial & Manufacturing business owners surveyed in 2024, according to Capstone’s 2024 Middle Market Business Owners Survey. The share of owners across all industries afflicted by heightened interest rates accelerated 5.1% year-over-year (YOY), rising to the second most prominent hurdle for business owners, and stalling portfolio roll-up pipelines. While hiring concerns have moderated YOY for middle market Industrial & Manufacturing business owners (from 34.1% in 2023 to 27.5% in 2024), labor concerns still remain a top concern for precision manufacturing businesses amid a shrinking labor pool and rising employment costs. Companies in the space have found it increasingly difficult to attract and retain skilled workers, particularly in specialized areas such as tower maintenance, metal fabrication, and engineering. Additionally, unionized workforces at some precision manufacturing companies adds another layer of complexity to labor management, with the potential for contract negotiations to cause delays and disruptions to workflow. Such threats have given rise to industrial automation technology, machines, and robots that provide a library of precision manufacturing capabilities and respite for a challenging Labor market. While the Federal Reserve’s 50 basis point interest rate cut in September has started to relieve borrowing cost pressure, business owners and sector M&A buyers may not see the direct impacts until further cuts are implemented.

While medium to long term precision machining fundamentals remain strong, the portion of the sector that operates in traditional general Industrials end markets continues sideways volume trends in 2025 that we have seen the past several years. Robust production volume backlogs remain for 2H’25 and once these begin pulling through, we expect to see a considerable change in business performance thereby sell-side transactions launching in 1Q’26. Differently, precision machining companies levered to medical devices, defense, aerospace, power generation, and data centers remain highly sought after.

Michael SchumacherManaging Director, Capstone Partners

Sector Participants Maintain Favorable Outlook for the Precision Manufacturing Sector Despite Geopolitical Volatility

While geopolitical volatility has threatened to disrupt sector operations among private, middle market precision manufacturing businesses, many have retained a positive sector outlook amid post-election optimism. As of March 2025, the Trump administration implemented a 25% tariff on imported goods from Mexico and Canada, a 10% tariff on Canadian energy imports, and an additional 10% tariff on imported goods from China, according to a White House press release.¹

In response, Canada has implemented retaliatory 25% tariffs on U.S. imports and Mexico officials have confirmed plans to follow suit. Despite the potential for a trade war to exacerbate inflationary cost pressures for manufacturers, newly implemented tariffs have created an amalgamation of favorable policy tailwinds driving substantial revenue and M&A opportunities.

Tariffs on imported industrial components could buoy precision manufacturers’ revenues as companies shift to domestic parts suppliers to avoid costly rate hikes on previously imported goods—providing tailwinds to sector M&A as buyers look to bolster stateside manufacturing synergies to meet this rising demand. Additionally, rising demand as businesses scramble to source new suppliers and avoid surging costs is expected to propel sector investment activity towards automation and advanced manufacturing technologies as Precision Manufacturing players enhance efficiency and bolster competitive advantages. In Q4 2024, “tariffs” were mentioned in the earnings calls of 221 companies on the S&P 500, the highest mark since 2020, according to FactSet.³

As tariff negotiations continue, causing volatility in implementation, Precision Manufacturing sector participants are expected to keep trade policy top of mind as they manage disruptions to materials sourcing and monitor rising costs. Of note, half of Industrial & Manufacturing business owners surveyed indicated that a party change in the White House (from Democrat to Republican) would have a positive impact on business operations, according to Capstone’s 2024 Middle Market Business Owner Survey. While tariffs have the potential to ignite a trade war between the affected nations and exacerbate manufacturers’ ongoing profitability pressures, U.S. tariffs on Mexican and Canadian imports have the potential to boost stateside consumption of precision manufactured components and in turn, spur growth in domestic M&A markets.

Private Strategics Underpin Rising M&A Activity, Private Equity Buyers Take a More Cautious Approach to Dealmaking

The Precision Manufacturing M&A market has demonstrated resilience to begin 2025, driven by private strategic buyer appetite. M&A activity the Precision Manufacturing market has increased 10% YOY, with 33 transactions announced or completed year to date (YTD). This increase has been underpinned by a YOY rebound in private strategic deal flow following a decline in deal activity in 2024. Private strategic acquisitions in the sector have risen 87.5% YOY to 15 deals announced or completed in YTD 2025. To date, rising private strategic deal activity has been driven by easing inflationary pressures and expectations for favorable policy tailwinds stemming from the newly instated Presidential administration. Although early indications have been optimistic regarding a sustained rebound in strategic activity, financial buyers have not demonstrated similar confidence to date. Sponsor-backed buyers have seemed to take a more cautious wait-and-see approach to begin the year, with volumes falling 50% YOY from 10 deals announced or completed in YTD 2024 to five through YTD 2025. Platform acquisitions have eked out slight YOY gains, rising by one deal YOY in YTD 2025 with many private equity funds awaiting a new cohort of scalable growth targets to enter the market.

Sector Players Seek Vertical Integration Across the Metals Value Chain

Portfolio realignment efforts across the sector helped invigorate bolt-on M&A activity in 2024 as participants scooped up accretive targets to bolster market share, operational capabilities, product diversity, and capture more of the metals production value chain—from manufacturing and fabrication to distribution. Notably, Nippon (TSE:5401) has demonstrated an imperative to strengthen group company collaboration and unlock synergies throughout its value chain. Nippon, Japan’s largest steelmaker, recently invested an undisclosed sum in Mlion, a civil engineering and construction materials distributor in Singapore (October 2024). Through the investment, Nippon aims to vertically integrate Mlion’s civil engineering and construction materials infrastructure in the Association of Southeast Asian Nations (ASEAN) region and strengthen its overseas business foundation. Similarly, Cornerstone Building Brands acquired Mueller, a manufacturer of residential metal roofing and components and steel buildings (July 2024, $475 million). The acquisition doubles Cornerstone Building Brands’ metal building materials footprint and builds on Mueller’s greenfield expansion strategy to further accelerate organic growth. These investments into vertically integrated solutions have unlocked cross-selling opportunities for sector players and is anticipated to continue spurring M&A appetite throughout 2025. Additional notable metals production vertical integration transactions are outlined below.

• Lapham-Hickey Steel Announces Acquisition of Alkar Steel and Processing (January, Undisclosed) – In January, Lapham-Hickey Steel announced the acquisition of Alkar Steel and Processing (ASAP) for an undisclosed sum. ASAP’s 125,000-square-foot facility provides cold-rolled, galvanized, high-carbon and hot-rolled pickled-and-oiled products, according to a press release.⁴ Lapham-Hickey aims to integrate ASAP’s specialized processing and market presence in Michigan into its broader network of service centers. “This acquisition will open doors for ASAP to better support our customers locally and those with plants across multiple regions in the country. The leadership at Lapham-Hickey has values and culture than align closely with ASAP’s. The entire ASAP team continues fully intact and remains committed to servicing our customers and growing our business in Michigan and across the U.S.,” said Patrick Fayad, President of ASAP, in the press release.
• Aalberts Announces Acquisition of Paulo Heat Treating, Metals Finishing and Brazing (December 2024, Undisclosed) – Aalberts (ENXTAM:AALB) announced the acquisition of Paulo Heat Treating, Metals Finishing and Brazing for an undisclosed sum in December 2024. Paulo provides industrial heat treatment and related services critical to achieving strength, hardness, and other metallurgical properties. The company operates five U.S. facilities and one in Mexico, with 522 employees and generating an annual revenue of approximately $105 million, according to a press release.⁵ Paulo serves attractive end markets like Automotive, Aerospace, Defense, and Power Generation and is expected to further enhance proximity in North America as per Aalberts’ ‘thrive 2030’ strategy.

Plastics Manufacturers Receive Heightened Interest from Sector Players Keen on Diversification

Plastics M&A activity within the Precision Manufacturing sector has accelerated as sector participants increasingly seek diversification into new and existing end markets and applications. These efforts have propelled investors to target companies serving high-margin markets like Medical Devices, Aerospace, and Automotive. Demand for specialized plastics such as medical-grade materials, lightweight composites, and high-performance thermoplastics has made precision plastics manufacturers attractive acquisition targets. Strategic buyers have expanded capabilities and diversified away from solely homogenous metals production through acquisitions, while private equity firms have rolled up niche players to create diverse and scalable platforms. The push for nearshoring and supply chain consolidation has further increased demand for domestic precision plastics suppliers.

Tariffs and rising metal prices have perpetuated this transition towards precision machined plastics. Companies with Food and Drug Administration (FDA)-approved materials, bio-based plastics, and artificial intelligence (AI)-driven quality control have commanded premium valuations. Advancements in 3D printing, micro-molding, and proprietary processing technologies have placed heightened importance on precision plastics manufacturers. As the sector continues to consolidate, firms with strong intellectual property (IP), automation-driven efficiencies, and high barriers to entry will likely remain top targets in the evolving M&A landscape.

• Bain Capital to Acquire Milacron (February, $562.8 Million, 1.1x EV/Revenue, 8.8x EV/EBITDA)– Bain Capital announced the acquisition of a 51% stake in Milacron from Hillenbrand (NYSE:HI), who will retain a 49% stake in the company, for an enterprise value of $562.8 million, equivalent to 1.1x EV/Revenue and 8.8x EV/EBITDA (February), according to a press release.⁶ Through the investment, Bain accesses highly engineered plastic processing solutions such as injection molding, extrusion equipment, and aftermarket parts and services. Milacron’s diverse variety of end markets such as Construction, Automotive, Packaging, Consumer Goods, and Medical spaces attracted Bain toward the investment, as they are all projected to benefit from domestic-focused manufacturing government initiatives.

“Milacron is an iconic American manufacturing business with a 50-year legacy of driving innovation in plastics. With manufacturers increasingly focused on supply-chain resilience and domestic production, we believe the U.S. is entering a manufacturing renaissance that will create significant opportunities for industry leaders like Milacron. With its advanced engineering capabilities, global reach, and deep customer relationships, Milacron is well-positioned to build on its strong foundation,” said Matt Evans, a Partner at Bain Capital, according to the press release.

• Trelleborg Sealing Solutions U.S. to Acquire Aero-Plastics (January, Undisclosed) –Trelleborg Sealing Solutions U.S., a subsidiary of Trelleborg (OM:TREL B), announced the acquisition of Aero-Plastics, a high-performance polymer materials precision injection molding, thermoforming, and machining manufacturer (January, undisclosed). Aero-Plastics, with sales of approximately $14 million in 2024, is Trelleborg’s most recent acquisition serving the Aerospace industry, followed by the acquisition of thermoplastic and composite products manufacturer Magee Plastics (August 2024, undisclosed), according to a press release.⁷ Trelleborg has also announced a new sealing solutions manufacturing facility in Morocco, expected to open by year end 2025.

The Manufacturing industry has entered the year with renewed confidence, driven by stabilizing supply chains, steady demand, and improving economic conditions. While challenges remain, particularly around labor and elevated costs, executives have been optimistic about growth opportunities and operational resilience. Meanwhile, tariffs are anticipated to accelerate M&A activity in the Precision Manufacturing market as companies look to mitigate supply disruptions by investing in domestic supply chains and bolster operational capabilities through vertical integration investments. Acquisitions may play a key role in 2025, with a growing cohort of active investors eyeing the Precision Manufacturing M&A market.

To discuss input pricing fluctuations, Industrials-wide tariff concerns, provide an update on your business, or learn about Capstone’s wide range of advisory services and Precision Manufacturing market knowledge, please contact us.

 Neve Adler, Analyst, was the lead Market Intelligence contributor to this article.

Endnotes

1. The White House, “Fact Sheet: President Donald J. Trump Imposes Tariffs on Imports from Canada, Mexico and China,” https://www.whitehouse.gov/fact-sheets/2025/02/fact-sheet-president-donald-j-trump-imposes-tariffs-on-imports-from-canada-mexico-and-china/, accessed February 28, 2025.

2. Washington International Trade Association, “Trump Tariffs: Tracking the Economic Impact of the Trump Trade War,” https://www.wita.org/atp-research/tracking-impact-trump-tariffs/, accessed March 5, 2025.

3. FactSet, “Earnings Insight Infographic: Q4 2024 By the Numbers,” https://insight.factset.com/earnings-insight-infographic-q4-2024-by-the-numbers?utm_campaign=bm&utm_medium=newsletter&utm_source=morning_brew, accessed February 28, 2025.

4. Lapham-Hickey Steel, “Acquired Alkar Steel and Processing,” https://www.lapham-hickey.com/acquired-alkar-steel-and-processing/, accessed February 28, 2025.

5. Aalberts, “Acquisition Paulo in America,” https://aalberts.com/progress/acquisition-Paulo, accessed February 28, 2025.

6. Bain Capital, “Bain Capital Announces Majority Investment in Milacron, a Leading Global Provider of Highly Engineered Plastic Processing Solutions,” https://www.baincapital.com/news/bain-capital-announces-majority-investment-milacron-leading-global-provider-highly-engineered, accessed February 28, 2025.

7. Trelleborg, “Acquisition strengthens Trelleborg’s aerospace offering,” https://www.trelleborg.com/en/seals/news-and-events/news/acquisition-strengthens-trelleborg-aerospace-offering, accessed February 28, 2025.