Dutch M&A trends in the Industrials & Services industry

Overall, while the entire market experienced a twenty per cent year-over-year drop in volume from 2023, the Industrials & Services sector turned the tables by achieving a remarkable 169 percent growth in deal value from FY23 to FY24, fueled by several notable large-sized deals that brought a strong rebound in the latter half of 2024. These include: JOST acquired Hyva (September 2024), BUKO acquired Hooke Highways (November 2024), Zeppelin acquired Pon Equipment & Power (December 2024) and in the same month Apheon and MML Capital acquired TMC.

Looking forward to 2025, we expect the same key drivers that influenced M&A activity last year to continue their impact. 

• Private equity dominance: private equity (PE) firms, with substantial ‘dry powder’ available for deployment, will remain a significant force in the I&S sector, particularly targeting the high-tech subsector due to its strong growth potential. In the Netherlands, PE is expected to stimulate and dominate the mid-market M&A, focusing on sectors with robust fundamentals, such as technology and industrials.
• Strategic consolidation: companies are actively seeking to consolidate fragmented subsectors, leveraging commercial synergies to gain market share and achieve cost efficiencies through bulk procurement and centralized support. 
• Defence sector growth: the defense sector is expected to experience consolidation, driven by innovation and efficiency, with geographical and geopolitical considerations becoming more significant than in other subsectors. This trend is further fueled by the European Commission's ‘Rearm Europe’ plan which aims to boost EU defence spending by 800 billion euros over the coming years.
• Emerging technologies: the sector will continue to see substantial investments in emerging technologies, such as artificial intelligence (AI) and automation, aimed at enhancing product development, operational efficiency, and drive digital transformation.

Despite the positive outlook, the I&S sector will continue to face several challenges in 2025. Ongoing geopolitical tensions are disrupting supply chains, increasing costs, and impacting market stability and predictability. This may prompt dealmakers to proritise domestic M&A opportunities. Access to reliable and affordable energy remains a key concern, particularly in light of the energy transition. Lastly, staffing gaps in high-skill areas are a persistent challenge, demanding innovative strategies to attract and retain talent. 

While the challenges exist, 2025 promises robust M&A activity across several key subsectors:

• High-tech manufacturing: investments and consolidations are expected in high-tech and high-precision machining and component manufacturing, driven by the need for advanced capabilities and substantial investment requirements.
• Electronics manufacturing services: consolidation in this subsector is anticipated due to succession issues and rising demand.
• Plastics and packaging: transformative M&A will be propelled by environmental regulations and plastic recycling quotas.
• Professional services: audit and staffing firms, due to their fragmented nature, regulatory pressures, labour shortages, automation opportunities, and unique remuneration models, will remain attractive to investors. Business services also offer consolidation opportunities and a stable cash flow.
• Construction and engineering: this subsector will see robust activity, fueled by increased regulatory pressure, the urgency of sustainability initiatives driven by the energy transition, housing shortages, and the adoption of advanced technologies like automation, robotics and AI.

According to PwC’s 28th CEO Survey, macroeconomic volatility is a top concern for CEOs across various subsectors in the Industrials & Services sector. CEOs in business services are particularly concerned about the need to reinvent business models, while engineering and construction CEOs are focused on inflation and managing costs. Industrial manufacturing CEOs are grappling with geopolitical complexities and are investing in GenAI and climate-friendly initiatives to adapt and grow.

The Dutch Industrials & Services M&A market presents a dynamic landscape for 2025, offering exciting growth opportunities while demanding strategic agility. Companies seeking to succeed in this environment must navigate the challenges of geopolitical uncertainty, energy security, and talent shortages by diversifying investments, embracing emerging technologies to drive efficiency and innovation, and strategically addressing the need for specialized talent. By focusing on these key areas, companies can capitalise on the robust M&A activity expected across various subsectors, ensuring successful transactions and sustained growth in a dynamic market environment.