Dive Brief:
- Growth in the defense, data center and artificial intelligence industries drove private equity investments in manufacturing in the first half of 2026, according to a report released Sept. 29 by the Private Equity Stakeholder Project.
- Manufacturing companies made up over 20% of private equity acquisitions involving entities with more than 500 employees. The second quarter saw 26% of the largest manufacturing companies taken over by private equity firms, up from 16% in the first quarter.
- The defense growth came after former Cerberus private equity executives took over the Department of Defense’s procurement and holdings. The increasing demand for AI and data centers is also driving private equity firms’ to spend in manufacturing, as they are “going all in on anything AI,” and pushing the advanced technology’s deployment in daily operations.
Dive Insight:
Twenty-nine percent of PE-acquired manufacturing companies with more than 500 employees in H1 of 2026 comprised entities providing goods and services to the defense sector, while another 29% provide components for data centers or to incorporate AI into products.
“The way they make their money is they’ll purchase a company using debt placed on the company in a leveraged buyout,” Sam Garin, communications coordinator with PESP, said in an interview with Manufacturing Dive. “The reason they're an attractive investment class for investors is because they have greater returns over shorter time periods than most traditional asset classes.”
While PE investments in defense companies is not new, President Donald Trump’s administration’s vocal support has also led to an increased interest, Garin said.
In March 2025, the U.S. Senate confirmed Cerberus co-founder Steve Feinberg as DOD’s Deputy Secretary. Since Feinberg has been in the role, has hired former Cerberus defense head George Kollitides to lead the Pentagon’s Economic Defense Unit, which launched in H1 of 2026.
Other Cerberus executives include David Lorch, who oversees DOD’s Office of Strategic Capital, and Tomas Rakusan, who’s serving as a senior advisor to Defense Secretary Pete Hegseth.
The current policy environment has also driven PE’s manufacturing interest, such as Trump’s global trade war and imposing tariffs, which are placing additional costs on companies.
“Private equity firms really see an opportunity as manufacturers are turning more towards investment and operation in the United States,” Garin said. “Reshoring should be something that helps Americans fundamentally that gives good jobs, provides good benefits, helps folks have a step up and and have a secure life. Unfortunately, what we're seeing is private equity trying to come and take that piece of the pie.”
The way PE firms accomplish this is by cutting costs “dramatically,” rather than make business improvements, Garin said.
Moreover, PE companies place the debt on the small- and medium-sized companies, which can be hard for them to manage, and lead to bankruptcies and layoffs, PESP’s communications coordinator said.
“A lot of companies will just kind of crack under the weight of that debt,” she said.
PE firms will also spend money on union-busting, according to the report. With unions, companies will have to spend a little more on benefits to ensure employees are treated well and are protected, Garin said. Comparatively, PE entities will cut those additional worker costs and spend money on union consultants rather than bargain for a fair contract, she said.
“They're ready, willing, and able to do what it takes to again put put profits above all,” Garin said. “That's that's really their their number one priority.”
Private equity firms acquired over 170 U.S.-based companies with a minimum of 500 employees during the first six months of 2026, the report stated.
PESP’s report also found that private equity ownership in manufacturing entities had led to an increase in market consolidation, layoffs, bankruptcies, union busting, and health and safety risks to workers and communities.
Small- and medium-sized companies can take steps to prevent issues such as layoffs and bankruptcies, Gamin said
“There can be stipulations put into the terms of the acquisition,” Garin said. “There can be a guarantee that when an acquisition goes through, that the private equity firm will come to the bargaining table and work with unions to ensure a fair contract for workers. And of course, there's also opportunities for workers to unionize and to exercise their collective power to ensure their rights are protected in the workplace.”
Editor’s Note: This story was updated to clarify the data referring to acquisitions of large-sized manufacturing companies.
