European manufacturing & distribution M&A overview: H2 2025
17 February 2026
The recent Moore Kingston Smith 2025 H2 manufacturing report shows signs of tentative recovery after a prolonged downturn. European deal activity edged up to 2,728 transactions in H2 2025, marking a full year of incremental growth and suggesting improving confidence across the sector.
Key takeaways include:
- Uneven regional performance: Italy and the Netherlands rebounded strongly, while Germany and Scandinavia saw activity fall back. The UK remained Europe’s most active market, with deal volumes up 5% despite tax and policy uncertainty.
- Foreign capital remains strong: Overseas investors committed a record £16.8bn into UK manufacturing and distribution in H2, reinforcing the UK’s ongoing appeal.
- Private equity still drives the market: PE featured in over 40% of UK transactions, supported by falling interest rates and significant dry powder.
- Sector divergence: Aerospace and defence stood out as the strongest performer in 2025, reflecting geopolitical uncertainty.
Looking ahead, easing inflation and better valuation alignment underpin a cautiously optimistic outlook for 2026, although geopolitical risks remain.