Strategic M&A and Operational Efficiency: How Allegion and Quest Drive Capital-Efficient Growth in 2025

In 2025, global M&A activity has surged 10% year-to-date, reaching $1.938 trillion, as companies in the consumer and industrial sectors leverage disciplined acquisitions to navigate macroeconomic headwinds, according to a BCG study. This trend underscores a broader shift toward capital-efficient growth strategies, where operational resilience and margin preservation are critical to long-term value creation. Two standout performers-Allegion and Quest Diagnostics-exemplify how strategic M&A and operational discipline can drive robust financial outcomes even amid sector-specific challenges.

Allegion: Industrial Resilience Through Targeted Acquisitions

Allegion, a leader in security products and solutions, has demonstrated exceptional operational efficiency in Q3 2025. The company reported a 9.5% year-over-year increase in net earnings per share (EPS) to $2.18, with adjusted EPS rising 6.5% to $2.30, according to Allegion's Q3 results. Revenues hit $1.07 billion, driven by 5.9% organic growth and a 10.7% reported increase. While operating margins dipped slightly to 21.8% (from 22.2% in Q3 2024), adjusted margins improved to 24.1%, reflecting effective cost management as noted in Allegion's Q3 results.

Allegion's M&A strategy has been pivotal to its success. The company has raised its full-year 2025 revenue growth outlook to 7–8% and anticipates adjusted EPS of $8.10–$8.20, signaling confidence in its ability to sustain margins despite inflationary pressures, according to the same report. Its focus on tuck-in acquisitions and geographic diversification-evident in the International segment's 22.5% revenue surge-has insulated it from regional volatility, the report said.

Quest Diagnostics: Consumer Health's Strategic Expansion

In the consumer health sector, Quest Diagnostics has leveraged M&A to capitalize on rising demand for diagnostic services. Q3 2025 results showed revenues of $2.82 billion, a 13.1% year-over-year increase, with adjusted EPS climbing 13% to $2.60, according to Quest Diagnostics' Q3 release. Operational efficiency metrics were equally impressive: year-to-date cash from operations grew 63.1% to $1.42 billion, per the earnings call transcript.

Quest's strategic acquisitions, such as the purchase of dialysis testing assets from Fresenius Medical Care, have expanded its footprint in high-growth niches, as noted in Quest's Q3 release. The company's partnership with Corewell Health to form a lab services joint venture further illustrates its focus on scalable, capital-efficient partnerships. These moves have not only diversified revenue streams but also bolstered margin resilience amid pricing pressures in traditional diagnostic markets.

Sector-Specific Dynamics and Margin Resilience

While both companies thrive in distinct sectors, their strategies share common threads. Allegion's industrial focus on hardware and security solutions benefits from infrastructure spending and urbanization trends, whereas Quest's consumer health model taps into aging populations and personalized medicine demand. However, both face near-term margin pressures: Allegion navigates supply chain costs, while Quest contends with reimbursement rate constraints.

Their responses highlight sector-specific nuances. Allegion prioritizes geographic and product diversification, whereas Quest emphasizes vertical integration and partnerships. For instance, Quest's narrowed 2025 EPS guidance ($2.95–$3) reflects disciplined execution in Texas, where investments in wastewater treatment and dialysis labs are paying off.

The Investment Case: Capital Allocation in High-Growth Markets

For investors prioritizing capital-efficient growth, Allegion and Quest offer compelling narratives. Allegion's 24.1% adjusted operating margin and 7–8% revenue growth outlook, as reported in Allegion's Q3 results, suggest strong industrial sector tailwinds, while Quest's 13% EPS growth and $1.42 billion in operating cash flow from the earnings call transcript underscore consumer health's scalability. Both companies exemplify how strategic M&A-when paired with operational rigor-can transform margin pressures into long-term value.

Conclusion

As 2025 unfolds, the interplay between M&A activity and operational efficiency will remain a defining factor in capital allocation decisions. Allegion and Quest demonstrate that disciplined strategies-not just aggressive deal-making-can drive sustainable growth. For investors, the lesson is clear: prioritize companies that align strategic acquisitions with margin resilience, especially in sectors poised for structural demand shifts.