M&A Report
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Executive Summary
This article is part of Bain's 2025 M&A Report. Machinery and equipment executives struggle to manage portfolios that are diverse, underperforming, and that burden them with inefficient resource allocation and stunted growth. They also need to prepare for activist investors. In late 2024, Elliott Management was pressuring Honeywell to break itself up—just the latest example following activist pressure in recent years on United Technologies and others, although not all incursions result in breakups. It's surprising, then, that relatively few have turned to M&A to address these concerns. Inactive company leaders cite unattractive valuations, the higher cost of capital, and other common reasons for shying away from deals. But there are even more compelling reasons to move. There’s abundant opportunity to create value through synergies in machinery and equipment. In fact, few industries are as in need of consolidation, with more than half of its global revenue coming from small and midsize companies (see Figure 1). And for building and equipment companies looking to reshape portfolios by divesting assets, private equity has stepped up to buy.
Figure 1
We studied three companies that serve as models for how deals can propel the industry forward. They didn’t wait for unfavorable (and unpredictable) conditions to improve. They acknowledged that successful M&A requires that acquisitions are not just about immediate financial gains but that they are also closely aligned with the company’s broader strategic goals (see Figure 2).
Figure 2
Emerson transformed itself from a collection of machinery companies to a strong competitor in high-growth sectors. Its portfolio included a number of relatively unrelated assets—each with a good competitive position but low growth, relatively underinvested in, and better ownership candidates. The company demonstrated the power of rigorous portfolio reassessment, focusing on core areas while divesting nonstrategic assets. Hitachi used M&A to redefine its global position by shedding noncompetitive sectors and investing in high-growth, future-proof areas. For example, its acquisition of GlobalLogic enabled the company to infuse technology into its business. Carlisle used M&A to move beyond its too-diverse portfolio and retool for sustainable construction and other long-term transformative themes. It acted decisively to refocus its business, illustrating the importance of seizing the moment to build strategic clarity. We’ll look at how these three industry leaders used M&A to strengthen their portfolios, enhance growth, and achieve sustainable leadership. Aiming for the futureAfter nearly a decade with minimal M&A activity, Emerson’s portfolio lacked alignment and strategic coherence. The company embarked on a comprehensive portfolio assessment to categorize businesses as core or noncore and determine the portfolio’s cohesiveness. It evaluated future market trends and identified the opportunity for key adjacencies in industrial software, test and measurement, factory automation, and smart grid solutions. Then, it developed five potential future-state portfolio scenarios, which it assessed through a robust qualitative and quantitative scorecard. Over the course of 2022, Emerson divested Therm-O-Disc, InSinkErator, and Climate Technologies. It then formed a $15 billion joint venture with AspenTech, a move that positioned Emerson in the industrial software market. (The company has since announced its intention to buy AspenTech.) Likewise, it entered the test and measurement market by acquiring National Instruments for $8.2 billion. Over a three-year period ending in 2024, Emerson executed or announced nearly $60 billion in deals, transforming into an industrial automation pure play, with a clear end-state vision supported by rigorous action plans that are flexible enough that Emerson can keep its options open. Among its next moves: Finishing the portfolio cleanup by selling its tools business. The company saw its earnings per share leap by 71% between 2010 and 2023, and its stock price rose from around $75 a share in 2021 to $130 in late 2024.
Getting small to get powerfulFor decades, Hitachi lived by the philosophy of “we do everything that Japan needs.” The company’s highly diversified portfolio included everything from consumer electronics to construction machinery to IT services. The wide range of sectors limited Hitachi’s global competitiveness. Then, the venerable company embarked on a strategic transformation, simplifying its business portfolio to focus on those areas in which it could become globally competitive and strengthening its position through acquisitions. Hitachi systematically divested most of its nonstrategic businesses, such as construction machinery and automotive segments with internal combustion engine exposure. It then invested in high-growth areas, such as digital engineering (with GlobalLogic) and energy transition (with ABB Power Grids). Ultimately, the company went from managing more than 40 businesses to approximately 20. As it streamlined, focused, and consolidated, it also adapted its organization for the future state, bringing in more international talent and taking other steps to establish itself as a more global company. The strategy has paid off dramatically. Hitachi’s stock price has increased nearly fivefold over the past six years. Under Hitachi’s ownership, GlobalLogic has seen revenue grow substantially, rising by 21% in the year ended March 2024 over the previous year. Similarly, under Hitachi Energy, ABB Power Grids achieved 32% revenue growth during the same period. Finding a focusInitially a holding company, Carlisle lacked a clear strategic focus across its diversified sectors. It operated wholly independent business units in very different markets, spanning business products, interconnected technologies for aerospace and automotives, and fluid/spray technologies. In 2017, the new CEO sparked a movement to establish a clear strategic focus on building products, extending that portfolio beyond its commercial roofing platform. The company engaged in disciplined M&A to realign its portfolio with the core industrial focus areas. It divested noncore operations and invested in areas aligned with long-term strategic growth. For example, over a three-year period, it divested a series of businesses in brakes and friction, fluid technologies, and interconnected technologies. In parallel, it embarked on a series of scope deals to build out its building products footprint. In 2024 alone, Carlisle bought MTL to expand its architectural metals business and Plasti-Fab (in a scale deal) to extend its expanded polystyrene insulation business. Ultimately, Carlisle successfully repositioned itself as a focused industrial leader with enhanced operational efficiencies and strategic clarity. The new focus has paid off. Carlisle achieved 81% revenue growth from 2010 to 2023. What do these three companies have in common? They didn’t wait for conditions to improve before selling no-growth or noncore assets and taking advantage of market fragmentation. They also shared an invaluable guiding principle: They used a long-term strategic vision to dictate their M&A moves. Read our 2025 M&A ReportOverviewIndustry Views |