BDO Report: More Manufacturers Want M&A, JVs

Chief financial officers of manufacturing companies are looking to shift into a more offensive posture in 2025, a new report from accounting and advisory firm BDO said. And one in four expects that those efforts will produce profitability growth of at least 10%.

Responding to BDO’s 2025 Manufacturing CFO Outlook Survey late last year, 68% of finance chiefs at firms with $500 million to more than $3 billion in revenue said they are forecasting revenue growth this year, which would be an eight-point increase from 2024. Helping drive those expectations: 22% plan to make an acquisition (versus 15% in 2024) and 25% expect they’ll enter into a joint venture or alliance of some sort (up from 14% last year).

Those growth plans come after a 2024 in which many manufacturing executive teams needed to focus more on operations than they had expected to coming into the year, said Bill Pellino, a BDO tax principal and leader of the firm’s National Manufacturing Industry Group. Year-ago forecasts of improving demand often didn’t materialize but input costs remained high. The work done to balance those factors should pay off this year, Pellino noted.

“I don’t think we have ever had a stronger manufacturing base,” he said, adding that many leadership teams have been through several fires since the beginning of the decade. “Disruption is a given.”

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The increase in executives’ intent to buy peers or strike joint-venture deals has taken those metrics above where they were in 2023. Pellino said the move comes after 2024 didn’t deliver on expectations in terms of the number of companies coming to market and added that there remain many middle-market companies with leaders ready to sell and retire. Private-equity firms are often the buyers of choice for them, but higher interest rates have restrained deal activity.

Other findings from BDO’s survey include:

In a continuation of the theme that more companies are focusing outwardly in 2025, only 10% of CFOs said they’re looking to carve out or divest a division of their companies. That’s down from 27% last year and 25% in 2023.
37% of manufacturers plan to invest more this year in U.S. expansion.
In addition to 51% of executives forecasting new product or service launches this year, 39% plan on implementing dynamic pricing strategies. Pellino said rising labor costs and other inputs are a notable factor driving that thinking.
More than 60% of firms are using an artificial-intelligence tool in some capacity while 24% have developed a proprietary platform. Those investments are part of a technology arsenal being deployed to refine operations, Pellino said, with automation and demand forecasting being particular areas of focus.

“Looking at the profitability of a product, at the profitability of a customer, has never been more important,” Pellino said.

Cost, Chaos and Quick Moves

The big thing to watch in coming months is how much executives’ responses to BDO and other recent surveys (see our sidebar) might need to change because of—or be altogether overtaken by—the actions of President Donald Trump’s administration on trade and tax policy. In the wake of the election, “soft” sentiment data improved significantly on expectations that the Trump team would loosen regulations and cut taxes. But the administration’s work over the past month on tariffs has injected more uncertainty than many had expected.

Among the most prominent voices speaking up on this topic has been Ford Motor Co. CEO Jim Farley. At the recent Wolfe Research Auto, Auto Tech and Semiconductor Conference, Farley lauded Trump’s stated goal of strengthening the U.S. auto sector and bringing more production here. But he added that the road so far has been bumpy.

“If this administration can achieve that, it would be one of the […] most signature accomplishments. So far, what we’re seeing is a lot of cost and a lot of chaos,” Farley said. “Let’s be real honest: Long term, a 25% tariff across the Mexico and Canadian border would blow a hole in the U.S. industry that we have never seen.”

Many executives who have been talking to investors lately on earnings conference calls or at investment-bank gatherings have spoken of their plans to pass along most of the tariff-related cost increases they might face. Speaking at the Citi Global Industrial Tech and Mobility Conference Feb. 18, Honeywell International Chairman and CEO Vimal Kapur said his team “learned a lot” about managing price increases during 2021 and 2022 but noted that today is different because Honeywell has at its disposal a productivity growth lever in addition to just hiking prices.

Still, Kapur noted that the uncertainty in the market today isn’t doing anyone a favor.

“This is like a goal post which keeps moving. It was on; now, it’s moved 30 days out,” he said. “Who knows 30 days from now what’s going to happen? Maybe some other tariffs will be pulled forward. [The] test of this is going to be how well we execute it while protecting our customers’ interests and […] protecting our margins.”

Rockwell Automation Inc. CFO Christian Rothe recently told analysts and investors that the equipment and software giant plans to handle tariff costs “primarily through price”—including by repricing orders in its backlog. But he added that the Milwaukee-based company also is tweaking the production of goods across its global network of manufacturing plants.

“We have some products that are produced in Mexico and destined for the U.S. but similar production that occurs in the U.S. where the destination is outside the United States,” Rothe said. “We are swapping those out, moving the production for non-U.S. customers outside the U.S. in order to create capacity to manufacture production for U.S. customers inside the U.S. It’s a small portion of our overall tariff-impacted operations but a good example of quick moves we can make.”

Still, if enough executive teams need to make a handful of such “quick moves,” the expansive visions and forecasts of November and December might need to make way for less ambitious plans come April and May.