Reshoring’s Next Phase - An M&A Opportunity

August 24, 2026

Reshoring is no longer the story. What has been happening to the U.S. manufacturing supply base is more newsworthy.

For years, U.S. manufacturers have been evaluating which components should be sourced closer to home. COVID accelerated the process, but the underlying considerations, including total cost, lead times, quality, delivery reliability and supply chain risk, are now well understood.

What is changing more rapidly is the technology available to U.S. manufacturers. Automation, sophisticated production equipment, sensors and artificial intelligence are reducing labor requirements, improving productivity and making domestic production economically viable for a broader range of highly engineered components.

That is creating an important M&A opportunity, and it is bringing the traditional make-versus-buy decision to the forefront.

Large OEM customers have generally transitioned away from vertical integration over the last few decades. Instead, they have wanted suppliers, including those backed by private equity, to build stronger domestic supply chains. For those companies, consolidation through acquisition has often been the answer, along with developing additional capabilities organically. 

Indeed, current M&A activity suggests that acquisition is playing an important role. PwC reports that U.S. industrial manufacturing M&A deal value reached a record $173 billion over the latest 12 months, up 28% from FY2025, with strategic buyers representing 86% of deal value, the highest concentration PwC has recorded. Interestingly, the number of industrial deals closed during the same period was essentially flat. It should be noted though that the broader M&A market was material down in terms of deal count, suggesting that industrials transactions captured a bigger piece of the overall transaction pie. Further, PwC reports that industrial acquisitions are increasingly capability-driven, with buyers targeting businesses that boost overall production capacity, improve productivity and strengthen supply chains. In other words, it is about expanding the offering, not arbitraging additional EBITDA. 

For many suppliers, buy-and-build is the name of the game.

Reshoring Has Entered a More Mature Phase

Manufacturers have had years to analyze the true economics of offshore sourcing. The relevant calculation extends beyond the quoted price of a component to include freight, inventory, lead times, quality, delivery performance, geopolitical risk and the potential cost of disruption.

The more interesting question today is what can change that calculation further. Technology is providing part of the answer.

Not every component should be manufactured in the United States. A high-volume, relatively simple and labor-intensive component may remain far more economical to produce in a lower-cost country. Nearshoring to Mexico can also provide an attractive alternative, shortening supply chains while retaining meaningful labor-cost advantages.

The equation changes as components become more sophisticated.

Precision-machined and highly engineered components often involve tighter tolerances, specialized materials, complex processes and demanding quality requirements. Labor may represent a smaller portion of their total value, while quality, reliability, delivery performance and technical expertise become increasingly important.

These are precisely the types of components for which U.S. production can become more attractive.

Technology Is Changing the Economics

Historically, one of the greatest obstacles to reshoring has been the difference in labor costs between the United States and lower-cost manufacturing countries.

Technology can narrow that disadvantage.

Modern CNC equipment, robotics, automated material handling and sophisticated production systems allow manufacturers to produce more with fewer direct labor hours. Artificial intelligence can push these improvements further.

NIST identifies applications for AI and machine learning in smart manufacturing that include advanced sensing, autonomous systems, robotics, digital twins, and supply chain and logistics optimization. AI-enabled predictive maintenance can identify potential equipment problems before machines fail. AI-assisted production scheduling can balance equipment availability, materials, labor and delivery requirements, while computer vision and machine learning can improve quality inspection.

NIST reports that more than 80% of manufacturers expect to increase their use of AI over the next two years and 78% expect to increase their investment in it.

These technologies do not eliminate America’s labor-cost disadvantage. But they can reduce labor required per unit while improving throughput, quality and equipment utilization. For the right components, that can materially change the economics of domestic production.

Proximity Creates Additional Value

For engineered components, proximity also provides something difficult to quantify: accessibility.

Customer and supplier engineers may need to sit together with drawings to discuss tolerances, materials and manufacturability. Customers may want to walk a supplier’s production floor. When a quality problem occurs, representatives from both companies may need to examine the component and manufacturing process together.

For precision machining, highly engineered components, aerospace and defense products, medical components and other technically demanding applications, proximity can improve collaboration, accelerate engineering changes and resolve production problems faster.

The best component manufacturers can become extensions of their customers’ engineering and manufacturing organizations.

The Critical Question: Make or Buy?

If more sophisticated manufacturing is going to occur domestically, someone has to create the capacity and capabilities to perform it.

For suppliers, this presents a fundamental choice: make or buy?

A manufacturer can purchase new equipment, expand a facility and develop capabilities internally. But sophisticated manufacturing consists of much more than equipment.

It includes experienced machinists and engineers, proprietary process knowledge, established quality systems, certifications, customer approvals, proven delivery performance and years of institutional knowledge.

Those assets can take years to recreate and jell organically. An acquisition can provide them immediately.

The implication is important: when time-to-capability matters, look no further than the current data center development push, acquisition can offer a significant advantage over developing those capabilities internally.

Why Buy-and-Build Fits Precision Manufacturing

The structure of U.S. manufacturing makes this opportunity particularly interesting. NIST reports that 98.3% of U.S. manufacturing companies have fewer than 500 employees.

Many of these businesses possess capabilities that are extraordinarily difficult to recreate. What some lack is scale, capital and the management resources necessary to invest aggressively in automation, advanced equipment, AI-enabled systems and additional capacity.

A consolidating supplier can acquire a smaller manufacturer, invest in its operations and combine its capabilities with complementary businesses. Private equity can pursue the same strategy through platform and add-on acquisitions.

The objective should not simply be to aggregate EBITDA.

A successful buy-and-build strategy can create a fundamentally more capable supplier with greater capacity, broader manufacturing capabilities, stronger engineering resources, more advanced technology and greater financial resources.

Importantly, the OEM customer receives the benefit without having to vertically integrate.

What This Means for Business Owners

For owners of precision and engineered-component manufacturers, these dynamics have important implications.

A business with sophisticated equipment, strong engineering expertise, attractive certifications, excellent quality and delivery performance, longstanding OEM relationships and opportunities for further automation may have strategic value extending well beyond its current earnings.

A buyer may see the company not simply as a stream of EBITDA, but as a way to acquire capabilities that would otherwise take years to develop.

With additional capital and complementary acquisitions, a relatively small manufacturer can become substantially more consequential to its customers. New equipment can be added, automation accelerated, engineering capabilities expanded and capacity increased.

M&A can transform a good individual supplier into part of a much more capable manufacturing platform.

What Comes Next

Reshoring has matured. The current phase is increasingly about creating the domestic supplier base capable of delivering on the opportunity.

Technology is improving the economics. Automation, advanced equipment and AI can reduce labor requirements, increase productivity and make U.S. production more competitive. But deploying these technologies requires capital, scale and management resources.

That is where the make-versus-buy equation becomes particularly important. Developing sophisticated manufacturing capabilities organically can take years. Acquiring established companies can provide equipment, people, certifications, customer qualifications and institutional knowledge immediately.

For suppliers and private equity investors, buy-and-build can therefore be more than an M&A strategy. It can be a mechanism for creating the stronger, more technologically advanced domestic manufacturing supply base that reshoring increasingly values.

The current phase of reshoring is about more than where components are manufactured.

It is about capitalizing on the technological advances and high-quality precision componentry produced by U.S. manufacturers and harnessing the synergies of proximity.