Automation, AI, and the Future of Industrial Technology M&A

The landscape for industrial tech M&A reflects many of the thematic challenges and opportunities across the current broader macro environment. The long-term tailwinds that have driven interest in pursuing transactions in recent years remain intact and buyers increasingly view M&A as core to achieving identified strategic objectives; however, the current environment is characterized by fewer broad auctions, with sellers pursuing targeted processes with buyers that have a clear rationale. The numbers bear this out, with mega-deals (transactions above $5 billion) now accounting for 56% of deal value, up from just 18% in fiscal year 2024, according to PwC. At the same time, overall deal count has declined, reflecting fewer, larger, more deliberate transactions rather than a broad-based recovery in volume. 

As the data would suggest, strategic acquirers are playing a more prominent role as they become increasingly accustomed to making decisions amidst persistent uncertainties. Strategic buyers accounted for 86% of both the last 12 months’ deal value and year-to-date 2026 deal volume in industrial manufacturing, according to PwC, underscoring how firmly corporate buyers are setting the pace.  Strong operating performance and robust valuations have emboldened many strategics to pursue acquisitions, particularly where M&A is viewed as a means to accelerating long-term strategic roadmaps and where there is an added urgency to buy proven solutions as opposed to building capabilities internally, with the buy-versus-build calculus increasingly favoring M&A.

Automation Demand Remains Durable

The factors driving industrial automation adoption remain persistent. Labor availability, wage inflation, the shift towards e-commerce, and increasingly complex fulfillment environments are pressuring operators to reduce their dependence on labor to maintain continuity. While customers have become more sophisticated in evaluating and implementing automation within their operations, technologies have matured and become better equipped to address customer pain points and demonstrate return on investment. However, adoption is not frictionless; the cost of capital and pressure on capital expenditure budgets are causing customers to scrutinize how quickly they deploy new solutions.

The market remains early in its development. Outside of the largest, most sophisticated operators, many companies are still early in their automation journey. Recent data from the 2026 MHI Annual Industry report found that 35% of the organizations surveyed currently deploy robotics and automation, while another 38% plan to implement these technologies within the next five years. Legacy equipment, fragmented data, and incomplete workflows can make it difficult to implement automation and to establish clear ROI expectations without first making incremental operational improvements.

Buyers Favor Proven, Defensible Solutions

The accelerated adoption of new automation solutions post-COVID resulted in linear growth expectations that have not been borne out in subsequent years. As a result, investors and acquirers of automation today have a more sober minded understanding of the profile of attractive targets – those that combine compelling technology with demonstrated evidence that the solution works in real-world environments in line with customer expectations. Buyers are increasingly looking for proven deployments at scale, attractive unit economics, strong customer ROI, and the ability to tailor solutions to dynamic operating conditions. Businesses that install solutions seamlessly, reduce integration risk, and generate repeat customer orders are better positioned to command premium interest.

Recurring revenue is another differentiator. Companies that monetize an installed base through software, maintenance, and services offer buyers a more durable, defensible business model. Sponsors are increasingly seeking these capabilities through add-on acquisitions that strengthen otherwise project-oriented platforms.  Acquirers are increasingly focused on businesses that combine hardware and software as a delivery mechanism for AI. While hardware-centric models were previously viewed as capital-intensive and difficult to scale, physical deployments are now viewed as providing protection from AI-native software solutions.

“Having a physical element to the solution or a physical deployment is a nice way to ensure it’s harder to be disintermediated,” said Peter Finn, who leads BGL’s Industrial Technology investment banking team.

M&A Is Advancing Physical AI Strategies

Investor interest in physical AI has accelerated, with companies in the sector raising $8.2 billion globally during the first half of 2026, which is more than double the capital raised during all of 2025, according to a Pitchbook report released in July 2026. Strategic buyers are using acquisitions to fill capability gaps, extend existing solutions, and advance physical AI roadmaps. Targets may provide data-capture capabilities, autonomy or perception technology, or tools that move buyers closer to the long-term goal of broader process orchestration and optimization.

Part of what buyers are underwriting is a shift in the underlying technology itself. Traditional, rules-based automation is reliable but inflexible; solutions perform consistently within programmed parameters but require costly re-engineering when conditions change, such as the introduction of a new SKU or a modified floor layout. In contrast, AI-enabled systems continuously learn from data and generalize to address novel situations, improving with deployment rather than staying fixed at installation. Targets that have demonstrated reliable, AI-differentiated performance in real operating environments – or provide a path for achieving that objective – are commanding the most buyer interest.

What’s Ahead for Industrial Technology in the Second Half of 2026

Automation thematically will continue to drive interest from both private equity and strategics given the availability of organic and inorganic growth opportunities.  Strategics are expected to remain more active in the near term, due in part to their longer investment horizons and urgency to acquire capabilities in a competitive environment.. 

For differentiated industrial technology companies, success will increasingly hinge on the ability to demonstrate clear customer value and a profitable business model amidst the convergence of physical operations, software, robotics, and AI. An improving macroeconomic backdrop and a rebalancing of activity towards private equity buyers will create a competitive environment for sellers; as a result, transaction activity is expected to accelerate, particularly in areas addressing acute operational pain points. 

About BGL’s Industrial Technology Investment Banking Team

BGL’s Industrial Technology investment banking professionals have extensive global transaction experience, valuable relationships, and knowledge across the industrial technology ecosystem, including automation, robotics, advanced manufacturing, and electronic components.

Our team has extensive experience sourcing and executing IPOs, sell-side M&A, buy-side M&A, private placements, strategic alternatives, and corporate markets advisory. BGL’s clients rely on our bankers to navigate the rapidly changing landscape and to help them achieve their goals through industrial technology M&A and private capital advisory services.