Asia-Pacific industrial M&A rises against the trend: transaction volume expected to grow 2% in 2026, supply chain restructuring drives regional investment boom.

Against the backdrop of an overall contraction in the global industrial M&A market, the Asia-Pacific region is emerging as a bright spot. According to PwC's latest mid-year M&A outlook, industrial and services transaction volumes in the Asia-Pacific region are expected to grow by 2% in 2026, while the global figure will decline by 7% over the same period. This contrast highlights Asia's central role in the global restructuring of manufacturing and supply chains.

India and Southeast Asia: The Main Battleground for Manufacturing Diversification

The report points out that India and Southeast Asia will continue to attract manufacturing investments, as companies actively diversify production and supply chains beyond China. Southeast Asia, with its labor cost advantages, policy incentives, and improving industrial infrastructure, has become the preferred destination for the "China+1" strategy. India is rapidly emerging in areas such as electronics manufacturing and auto parts, driven by both domestic market demand and export-oriented policies. Japan and South Korea will also remain active, particularly in automation, battery technology, and electronics.

Deal Hotspots: AI Infrastructure and Automation Capacity

PwC emphasizes that future manufacturing-related M&A will focus on assets supporting AI infrastructure, grid resilience, and automation capabilities. This includes robots, industrial software, sensors, and interconnected systems—technologies that not only enhance production efficiency but also reduce reliance on labor. Data shows that by 2030, the median share of highly automated manufacturers is expected to jump from the current 18% to 50%, signaling that the automation sector will become a core focus of investment strategies.

Localization and Corporate Divestitures: Strategies to Navigate Tariffs and Policy Uncertainty

Companies are accelerating localization of production and restructuring supply chains to mitigate tariff risks and secure access to key markets. The report specifically notes that corporate divestitures of non-core assets and manufacturing businesses benefiting from localization trends may offer attractive opportunities for investors. Localization efforts in India and Southeast Asia are particularly prominent, with manufacturing assets in these regions becoming highly sought-after M&A targets.

Concerns in Cross-Border Deals: Geopolitical and Policy Uncertainty

Despite the optimistic outlook for transaction volume growth in Asia-Pacific, cross-border deals still face headwinds from geopolitical tensions, rising tariffs, and adjustments in national industrial policies. PwC warns that cross-border transaction activity will be uneven, and investors need to carefully assess policy risks. However, companies deeply embedded in local supply chains and capable of substituting Chinese production capacity will still attract capital.

Overall Outlook: The Resilient Logic of Asia-Pacific Industrial M&A

PwC's projections are based on announced transaction data from the first five months of 2025, adjusted for time lags. While these figures are not strictly forecasts, they are sufficient to reflect a structural shift in the global industrial investment landscape. While other regions are cutting back on transactions due to economic slowdowns and policy uncertainty, Asia, leveraging the multiple advantages of supply chain restructuring, technological upgrades, and domestic demand markets, is emerging as a new high ground for industrial capital aggregation.