Private Equity Consolidation in the European Manufacturing Sector: Strategic Bidding Dynamics and Shareholder Persuasion

The European manufacturing sector has emerged as a focal point for private equity (PE) consolidation, driven by fragmented markets, operational transformation opportunities, and evolving investor preferences. In 2024, PE deal activity in the sector surged by 3.3% in volume and 23% in value, reaching €342 billion, as firms extended holding periods by 21% since 2020 to prioritize long-term value creation over short-term gains, according to PwC's trend report. This strategic shift reflects a broader industry trend toward operational improvements, digital adoption, and inorganic growth strategies like 'buy-and-build', as PwC's trend report notes. However, 2025 has brought new challenges, including geopolitical uncertainties and a 24.6% quarterly drop in deal values in Q1 2025 due to U.S. trade tariffs and political instability in France and Germany, according to PitchBook's Q1 2025 breakdown. Despite these headwinds, fundraising remains robust, with Ardian closing a record-breaking €29 billion secondaries fund in the UK and France, as PitchBook's breakdown documents.

Strategic Bidding Dynamics: From Caution to Selective Aggression

Strategic bidding in European manufacturing PE consolidations has evolved in response to macroeconomic volatility. In Q2 2025, activity skewed toward smaller add-ons, with 39% of deal value attributed to these transactions, signaling a defensive approach amid uncertainty, according to PwC's trend report. This contrasts with the pre-2023 peak in large take-privates, which saw a 65% decline in value by 2023 due to macroeconomic pressures, as the Roland Berger outlook explains. The current environment favors middle-market buyout follow-on funds, as limited partners (LPs) prioritize proven strategies and risk mitigation, a dynamic highlighted by PwC's trend report.

A key example of strategic bidding is the rise of earnouts in PE acquisitions. Amid tariff-related uncertainties, European buyers are structuring deals with performance-based milestones to align incentives with sellers while preserving capital until targets meet operational benchmarks, as noted in a Slayton Search article. This approach has been particularly effective in fragmented markets like Central and Eastern Europe (CEE), where strategic buyers have outpaced traditional PE firms in manufacturing M&A, according to PitchBook's breakdown. For instance, international corporates have leveraged their balance sheets to execute cross-border roll-ups, consolidating SMEs into scalable platforms, as PitchBook's analysis shows.

Shareholder Persuasion: Aligning with Investor Priorities

Shareholder persuasion in PE consolidations has centered on demonstrating resilience, diversification, and alignment with structural market trends. Investors are increasingly favoring larger, diversified firms that offer broader service offerings, such as wealth management and private debt, to meet evolving AUM growth expectations, as PitchBook's breakdown observes. This has fueled a wave of industry consolidation, with firms like TPG (acquiring Angelo Gordon) and EQT (acquiring Baring Private Equity Asia) expanding geographically and across asset classes, per PwC's trend report.

In the manufacturing sector, PE firms are leveraging operational overhauls and digital transformation to persuade shareholders of their long-term value. For example, the adoption of lean manufacturing practices and automation has enabled portfolio companies to reduce costs and improve margins, as seen in the case of a global high-temperature materials firm revitalized by Platinum Equity, a development discussed in the Roland Berger outlook. Additionally, the focus on sustainability and energy transition has resonated with ESG-conscious investors, with 23% of European mid-market PE activity in 2024 targeting industrial sectors like automation and defense, according to Baird's predictions.

Case Studies: Consolidation in Action

1. Ardian's €29 Billion Secondaries Fund: This landmark fundraising underscores investor confidence in European PE's ability to unlock value through secondary buyouts and portfolio optimization, as PitchBook's breakdown highlights. The fund's focus on industrial and manufacturing assets aligns with the sector's fragmented nature and operational improvement potential.
2. TPG and EQT's Global Expansion: By acquiring Angelo Gordon and Baring Private Equity Asia, respectively, these firms have expanded into infrastructure and private debt, diversifying revenue streams and appealing to LPs seeking multi-asset strategies, per PwC's trend report.
3. CEE Manufacturing Roll-Ups: Strategic buyers in Poland and the CEE region have capitalized on fragmented markets to consolidate SMEs into regional champions, leveraging economies of scale and digital tools to enhance competitiveness, a trend observed in PitchBook's breakdown.

Future Outlook: Navigating Uncertainty

While geopolitical risks persist, European PE activity is expected to rebound in H2 2025, driven by improved debt financing and a backlog of M&A deals, as the Roland Berger outlook forecasts. The industrial sector, in particular, is gaining traction as a safe haven, with 15% of add-ons in 2025 focused on industrials, Slayton Search notes. However, firms must navigate regulatory complexities and valuation volatility, as highlighted by the 24% YoY increase in exits in 2024 driven by liquidity demands, a point Slayton Search also discusses.

Conclusion

Private equity consolidation in the European manufacturing sector is being reshaped by strategic bidding dynamics and shareholder persuasion tactics that prioritize resilience, diversification, and operational excellence. While challenges like U.S. tariffs and political instability persist, the sector's fragmented markets and structural growth opportunities-particularly in automation and sustainability-position it as a key battleground for PE firms. As the industry navigates this complex landscape, the ability to align with investor priorities and execute value-creation strategies will determine long-term success.