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Industrial companies may lack the transformational appeal of software developers and semiconductor makers. But for activist investors, their lagging shares and sprawling operations offer something else: businesses that could be worth more if they were better run—or broken apart.
According to DMI’s latest 13F summary, activists put more than $2.3 billion into new industrial holdings in the second quarter, more than in any other sector.
Starboard Value put $107 million into industrial pump maker Flowserve and then pushed for a focus on improving margins while pointing to "attractive secular growth themes in industrial markets today." Jeff Smith's fund is also running campaigns at construction materials supplier Knife River where it has flagged concerns over the margin gap with its peers which it argues has led to constrained earnings power relative to expectations and eroded investor confidence.
Third Point Partners has also been active in the space, adding two industrial companies to its portfolio in the second quarter, including a $31 million holding in Space Exploration Technologies Corp. (better known as Elon Musk’s SpaceX). Corvex Management has also been drawn to the sector with a $36 million stake in Onterris.
Nine U.S.-based industrials-focused companies have been publicly targeted by activists in the nine-month period to the end of September this year, with 13 finding activist attention in 2025.
The demands often accompanying these investments suggest an appetite for more than board seats. DMI recorded 16 activist demands in the period, including pressure for operational changes, M&A or divestitures, putting both business performance and corporate structure under scrutiny.
Jim Chadwick, Ancora Advisors’ president of alternatives, describes industrials as one of the busiest areas for activists this year. Many industrial and chemical companies have lagged the technology-heavy indexes, he said, leaving investors looking for value outside the market’s most crowded trades.
Chadwick sees opportunities in chemicals, building products, heavy industry and electrical equipment. Such companies also offer activists a practical advantage: because they often own several businesses, investors have more avenues to push for change.
“A lot of industrials, because they're more conglomerate in nature, are multi-segmented,” he said. “You can basically lift out a segment or sell off a segment and then focus on the core of the business, redeploy capital.”
Businesses on the block
That conglomerate structure can turn an argument over performance into a debate over what a company should own.
In 2023, a shareholder proposal urging Honeywell International to adopt a policy that would require an independent chair failed, albeit with strong support secured at 45%. A year later, Elliott Management built a $5-billion stake in the industrials conglomerate, declaring it as one of its largest to date. The company afterwards announced the sale of its Protective Industrial Products (PIP) portfolio unit. In May 2025, Elliott gained a board seat. Less than a year later, Honeywell shed its productivity solutions arm for $1.4 billion in cash.
In some cases, activists themselves can become the bidder. In August, Ancora offered $1.4 billion for H.B. Fuller’s adhesives business after opposing its Advanced Medical Solutions deal. Chadwick said Fuller had underperformed, traded at a relatively low multiple, and argued that its adhesives business was worth more than the market seemed to recognize.
Speaking to DMI, Chadwick said Ancora was interested in doing more private equity type deals going forward. "I think a lot of activists are using that now more than ever. In these situations, it just becomes another tool on the tool belt."
Protection invites scrutiny
Trade policy may also help draw activists to the sector.
Nickolay Gantchev, a professor at the University of Virginia, said research on earlier tariffs in 2018-2019 found that activism shifted toward industries protected from import competition, many of them industrial. The targets were not necessarily struggling companies. Activists often sought governance changes and board seats at businesses that had performed well yet had failed to match their peers in terms of shareholder returns.
“Our interpretation is that protection weakens the discipline of competition, which creates opportunities for activists,” Gantchev told DMI. “The current tariffs may be playing a similar role, which could help explain the recent upswing in campaigns at industrial companies.”
The current demand for nuclear power, data centers and infrastructure raises a similar question: how much of the opportunity for industrial companies is reaching shareholders?
Starboard Value’s campaign at Flowserve has put operational performance and margins at the center of that debate. The pump and valve maker has exposure to nuclear power, giving investors a favorable demand story against which to judge results.
One source familiar with Starboard’s tactics noted that Flowserve has a product portfolio similar to peer ITT’s, but hasn’t adopted the same operational best practices and has underperformed as a result. He describes Starboard as an operational activist that invests when it sees company-specific opportunities to improve.
That strategy of targeting industrial companies that have not taken advantage of favorable tailwinds extends to Starboard’s campaigns at Fluor, Knife River and Honeywell, each of which is positioned to benefit from growing demands for power generation to feed AI demand, but continue to trail their peers.
AI’s industrial ripple
That AI disruption is emerging as key focus for activists, particularly as it relates to industrials and technology. According to a recent Barclays report, campaign activity at such sectors is at a record high, as activists increasingly target companies exposed to AI-linked disruption, from direct adoption to adjacent infrastructure themes.
Jill DeMarco, director of research at proxy solicitation and advisory firm MacKenzie Partners, expects industrials to stand out as one of the most vulnerable sectors in 2027. “Economic shifts, tariffs, reshoring and supply-chain realignments are creating both opportunities and pressure points, particularly for companies with complex portfolios or a meaningful valuation gap relative to peers,” she told DMI in a recent interview.
