Makers of power equipment, cooling systems and controls were never thought of as technology assets. The market is beginning to price them as strategic ones.
In many AI projects, the scarcest item is not a chip. It is a place in a factory queue. Wood Mackenzie reports that lead times for large substation transformers have stretched from about 140 weeks in 2023 to more than 160 weeks this year, well over three years, and the switchgear, cooling plant and controls around them are often in similar demand. Equipment of that kind cannot be produced quickly, so the capacity to design, build and test it has become a scarce asset. That is why a group of industrial manufacturers and technical service providers, long regarded as unglamorous, is now drawing serious attention from strategic buyers and sponsors alike. For M&A advisors, the question is which of these businesses are genuinely positioned for the opportunity, and how their owners should prepare.
The demand behind this is real, though not precisely measurable. Data centres used about 1.5% of the world’s electricity in 2024, and the International Energy Agency’s base case has that more than doubling by 2030. The agency is equally candid about the limits of its forecasts. Data centres account for roughly a tenth of global electricity demand growth to the end of the decade, less than electric vehicles, air conditioning or industrial motors, and its range of outcomes for 2035 is wide. The sensible reading is that the demand is substantial but uncertain, and that uncertainty shapes how buyers price the assets that serve it.
Deal data shows capital moving in that direction. PwC’s analysis points to a rise of about 9% in global industrials and services transaction value this year, even as volumes fall by around 7%, a pattern of fewer and larger transactions. In US industrial manufacturing, value over the latest twelve months reached a record $173 billion, with strategic acquirers accounting for 86% of it. The premiums are concentrated in businesses linked to power equipment, thermal management, automation and controls, which suggests buyers are paying for capability and not for scale alone.
Scarcity explains much of the pricing. Wood Mackenzie also projects the US market for data centre electrical equipment to grow from around $20 billion in 2026 to $65 billion by 2030. Where production cannot be expanded quickly, factory capacity, testing facilities and skilled labour become the assets that matter. The same logic applies in engineering and construction, where transaction values are forecast to rise 64% and technical talent commands a premium.
The implications for the mid-market are more nuanced than the megadeal headlines suggest. Smaller transactions remain uneven, held back by differences over valuation and by margin pressure. Yet fragmented industrial segments continue to attract sponsors pursuing buy-and-build strategies, while strategic buyers dominate the larger deals. An owner-managed specialist with a defensible position in power, cooling, controls or technical services is therefore well placed, either as a platform around which others are assembled or as an add-on of genuine strategic value.
Buyers are applying a consistent set of tests. They look for resilience, productivity and secure access to critical capabilities, which brings supply chains, production footprint and automation readiness into diligence. Many manufacturers are relocating production closer to end markets to manage tariff exposure, and the share of industrial manufacturers running highly automated processes is expected to rise from a median of 18% to 50% by 2030. Given the uncertainty in the underlying demand forecasts, a careful buyer will also ask how much of a target’s revenue depends on data centre investment, and how much on steadier sources such as grid modernisation and general industrial demand.
For advisors and owners, preparation is the decisive variable. The strongest cases distinguish structural demand from cyclical demand, document backlog, capacity and technical staffing, and show how automation supports margins. Owners who can present that evidence clearly will negotiate from a position of strength, and some will find that a partial sale or a platform partnership serves them better than an outright exit. Advisors who open those discussions early are best placed to convert a selective market into completed transactions.