Structural Shift Reshaping Industrials: Portfolio Realignment
A Series of Perspectives from FTI Consulting Experts Informed by Our 2026 Global CFO Survey
-
June 23, 2026
-
The M&A Opportunity Reshaping Industrials
The Industrials sector is in the midst of a significant portfolio realignment, and the pace is accelerating. As we outlined in our first article in this series, the pressure on diversified conglomerates is structural, not cyclical. Investors are repricing complexity downward and strategic focus upward. What was once a board-level debate has become a competitive necessity, and data shows organizations are pivoting accordingly, with M&A as the value creation priority for CFOs and private equity alike.
What the Market Is Telling Us
The message from investors is clear: diversification, at the expense of agility and focus, faces a penalty on valuations. General Electric’s three-way split into GE Aerospace, GE Vernova, and GEHealthCare, and Honeywell’s announced separation into three independent companies, are not outliers; they are proof of concept.1, 2 Each separation was followed by meaningful re-rating of the successor entities, with the combined post-separation market value of each business substantially exceeding what the parent commanded as a conglomerate, and outpacing broader index performance over the same period.
Transactions data tells the same story. In Q1 2026 alone, industrials accounted for 1,857 disclosed deals, the highest volume of any sector globally, representing 29.2% of all transactions.3 Strategic buyers drove the overwhelming majority of that activity at 82.5% of disclosed deals, making clear that corporate portfolio reshaping, not financial engineering, is the primary engine of current deal flow.4 Average transaction value grew 14.4% year-over-year (even as quarter-over-quarter deal value moderated) confirming a market pivoting toward deliberate, thesis-driven transactions rather than broad-based volume.5
Public equity markets are more accessible for industrials companies, with 35% reporting significantly improved availability versus 25% overall, while debt financing remains constrained, particularly for PE-backed businesses.6 That divergence is shaping not just who is buying, but how deals are being structured.
FTI Consulting’s 2026 Global CFO Survey further reinforces this. Industrials CFOs show stronger acquisition appetite than the overall survey average (49% vs. 45%), while also recognizing inflation (47%), capital markets uncertainty (45%), and supply chain disruption (44%) as the leading concerns dampening broader transaction appetite.7, 8 In an economic moment defined by macroeconomic uncertainty from multiple fronts, the strategic imperative to sharpen companies’ focus is clear.
How Companies Should Think About This Dynamic
What we’re seeing in today’s market isn’t a passing phase tied to one cycle or a temporary macro disruption — it reflects a deeper, lasting shift in how value is created in this sector. That’s good news for companies ready to act: those who move with intention and clarity are well positioned to lead the next chapter of growth and shape their own valuations rather than wait for the market to assign one.
For corporates, the imperative is portfolio clarity. Which businesses are genuinely core? Which assets obscure value through operational entanglement, divergence in focus or investor confusion? The CFO survey is clear that AI leverage (51%) and operational optimization (45%) are the top value creation priorities for industrials CFOs, capabilities that are often easier to execute in a focused enterprise than across a complex, multi-business portfolio.9 The strategic agenda is straightforward: define the core with rigor, identify non-core assets with realistic exit timelines, and direct capital toward businesses with the clearest path to competitive advantage.
For private equity, the environment demands a recalibrated playbook. More assets are coming to market, but with strategic buyers commanding 82.5% of deal volume, competition for the best assets is intensifying.10 Higher rates have compressed leverage-driven returns, making operational value creation, not financial engineering, the primary driver of performance. This favors longer hold periods, deeper sector expertise, and investment theses that explicitly map likely exit buyers from day one. Firms that adapt will find exceptional assets available; those running the legacy playbook will struggle to generate the returns their Limited Partners (“LPs”) have come to expect.
For private companies, the dynamic cuts both ways. The current market presents genuine exit opportunity, as motivated PE buyers and active strategic acquirers represent a deep pool of potential bidders for well-positioned businesses. Knowing your market positioning — whether you are an anchor for a new platform, or a bolt-on to an existing one — helps clarify the timing and attractiveness for these buyers. But consolidation also raises competitive risk: today’s independent competitor may soon be backed by PE capital or absorbed into a larger platform, with greater resources and reach. Private industrial companies need clear answers about where they have defensible advantage and a concrete strategic plan — built before competitors are better resourced, not after.
The key takeaway across all three audiences is the same: the direction of travel is clear, and the cost of inaction compounds. Whether the right move is to buy, sell, separate, or reposition, the companies creating value in this environment are those acting on a deliberate thesis rather than those waiting for greater clarity or advantageous conditions that may not materialize.
Overcoming the Challenges
Conventional playbooks are no longer attuned for these shifting dynamics. Several factors in particular need to be reframed for managing and maximizing value through portfolio realignment:
Bid-Ask spreads are widening, and deal teams are closing these gaps through earnout structures and staged mechanisms. In a market shaped by trade and tariff policy, rate trajectory, supply chain volatility and inflationary pressure, buyers are pricing assets whose near-term performance is subject to forces beyond management’s direct control (though business performance requires continuing to mitigate these impacts). While valuation uncertainty persists, deals closed with average transaction values up 14.4% year-over-year.11 Applying these alternate structures to deals provides greater clarity on acquisition costs without requiring overpayment on an asset.
Multiple compression for public conglomerates can handicap transactions. Lower valuations make stock-based acquisitions more expensive and asset sales harder to execute at full value, a temporary paralysis that affects sequencing even when strategic direction is clear. For buyers, this can exacerbate the bid-ask gap, reinforcing the need for alternate deal structures to clarify total deal value for all parties. For sellers, providing a compelling narrative, tying in clean financials and highlighting tangible assets with demonstrated standalone value, helps mitigate discounting of an asset’s value in these circumstances.
Timing transactions for optimal value may cost more than the upside is worth. The timing question is the most common one we hear from boards and executive teams. Waiting for macro clarity carries its own cost, including delayed value creation, compounding competitive risk, and transaction windows that close. From both market data and our Strategic CFO Survey results, it is clear that many are inclined to act rather than wait for ‘optimal’ value. Holding a non-core asset through continued uncertainty does not improve its strategic fit; it often erodes its standalone appeal and narrows the buyer pool. The more useful question on timing isn’t when optimal conditions will arrive — it’s what waiting is truly costing.
Where the Opportunity Lies
Despite the challenges, this is a moment of genuine opportunity for buyers and sellers alike.
The repositioning is already visible in how private equity is allocating capital: M&A jumped from the lowest-ranked value creation priority to the highest in a single year, as firms move to build focused platforms rather than defend sprawling ones.12 The capital is there to sustain it, global buyout dry powder stands at $1.3 trillion and is aging, intensifying the pressure on sponsors to deploy.13 That capital is actively searching for quality industrial assets, and it is not alone. Strategic buyers are equally motivated, as the data bears out; industrials led all sectors in Q1 2026 deal volume.14 The supply of quality assets will continue to grow as corporate portfolio reshaping runs its course. Carve-outs, divestitures, and geographic exits will be a recurring feature of the industrials M&A landscape for years ahead. For buyers who can evaluate and integrate these assets effectively, the pipeline is deep and the competition, while real, is not universal.
For sellers, preparation is the differentiator. Clean financials, a compelling standalone narrative, and operational documentation that holds up under diligence will command premium interest from motivated buyers. The market is not hostile to sellers; it is demanding of them.
The bottom line: portfolio realignment in industrials is not a wave that has crested — it is still building. The companies delivering greater value from their portfolios are those that bring strategic clarity, operational capability, and executional agility to decisively reposition their companies. Expertise and coordination unlock value that others miss. In a market this active, that advantage is crucial.
This is the first in a series of six articles exploring the structural shifts reshaping industrials. Subsequent pieces will examine geopolitical fragmentation, skilled labor scarcity, AI integration, energy dynamics, and capital cost discipline.
Footnotes:
1: Singh, Rajesh Kumar & Abhijith Ganapavaram, “GE completes three-way split, breaking off from its storied past,” Reuters (Apr. 2, 2024).
2: Honeywell, “Honeywell announces intent to separate automation and aerospace, enabling the creation of three industry-leading companies” (Feb. 6, 2025).
3: S&P Capital IQ & FTI Consulting, Global M&A Q1 2026 Market Update [Data set and analysis] (2026), Slide 1.
4: Id. Slide 5.
5: Id. Slide 3.
6: Global CFO Survey (2026) — Industrials extract [Unpublished raw data], Slide 3.
7: Id. Slide 4.
8: Id.
9: Id. Slide 2.
10: S&P Capital IQ & FTI Consulting, supra note 3, at Slide 5.
11: Id. Slide 3.
12: 2026 Private Equity Value Creation Index: The Value Creation Edge, Secrets of Private Equity's Top Performers — from a global survey of 550+ senior PE leaders,” FTI Consulting (2026).
13: “Global Private Equity Report 2026,” Bain & Company (2026).
14: S&P Capital IQ & FTI Consulting, supra note 3, at Slide 1.
Related Insights
Related Information
Published
June 23, 2026
Key Contacts
Senior Managing Director