Over the past several years, industrial companies have repeatedly asked us the following question: Why have some industrial companies achieved valuation gains that far outpace their peers? At first glance, many appear to benefit from exposure to faster-growing markets, but a closer look suggests this doesn’t fully explain their success. To better understand what creates sustained multiple expansion, we analyzed the activities and outcomes of 163 S&P 400 and S&P 500 industrial companies between 2019 and 2025 (see sidebar, “Our methodology”). Our analysis of industrial companies listed in the United States points to a more interesting explanation that goes well beyond sector exposure and challenges common assumptions about how industrial companies earn higher valuations.
The findings indicate that the strongest multiple expanders do not follow a single playbook. End-market exposure certainly matters, particularly in faster-growing areas including power infrastructure, data centers, and automation. Value chain position also plays a role, with component and service companies among the strongest performers. But our analysis also shows that company-specific choices are highly influential. Fifty-two companies—a group we dub “accelerators”—expanded their enterprise value to EBITDA (EV/EBITDA) multiples faster than the median company in their respective industries did, suggesting that the strongest performers did more than ride favorable markets. Most combined several moves at once, often expanding into new parts of the value chain and creating new products, using M&A to reposition their portfolios toward higher-growth segments, and making operational improvements.
TSR provides the most comprehensive view of value creation from an investor’s perspective, reflecting both improvements in business performance and changes in market valuation. While TSR is influenced by several factors, multiple expansion is often a significant contributor, as it reflects increasing investor confidence in a company’s value creation potential. Because multiple expansion is one of the clearest ways to see how the market rewards value creation, we made it the focus of our analysis. Ultimately, what matters most is not multiple expansion, which cannot continue indefinitely, but the creation of value through faster growth, stronger margins, higher returns, or some combination thereof. Although management teams cannot fully control how markets value their companies, they can influence outcomes through actions that improve business performance and strengthen investor confidence.
This article begins with a description of our accelerator category and looks at how multiple expansion relates to shareholder return. It then examines the four actions accelerators are most commonly engaged in and, for each one, highlights a company that achieved above-benchmark multiple expansion by pursuing that path. Finally, we consider the implications for the leaders best positioned to act on these insights.
The accelerators and why they matter
Our analysis found that 47 percent of the companies studied expanded EV/EBITDA multiples during the period and that the median grower expanded multiples by roughly 40 percent. To isolate factors within management’s control from broader sector momentum, we looked for industrial companies that expanded their multiples faster than the median company in their industry. This perspective yielded our 52 accelerators (Table 1). The accelerator group’s performance relative to industry benchmarks suggests that investors respond to company-level performance, strategic repositioning, and execution, as well as to favorable markets.
The analysis identified 52 ‘accelerators,’ which not only expanded multiples but outperformed their industry benchmarks.
| Company group | Companies, # | Share of universe |
| Accelerators | 52 | 32% |
| Other multiple growers | 25 | 15% |
| Flat multiples | 58 | 36% |
| Decreasing multiples | 6 | 4% |
| Outliers | 22 | 13%1 |
| Total | 163 | 100% |
The accelerators spanned OEMs, service providers, distributors, and component companies across a broad range of industrial sectors. Some benefited from exposure to electrification, power infrastructure, aerospace, automation, or data center demand. Others focused more on portfolio simplification, operational improvement, or value chain repositioning. This breadth suggests that sustained multiple expansion is not limited to one type of industrial company or one strategic approach.
The financial impact of multiple expansion is visible in the TSR performance of the strongest companies in our analysis. Among accelerators, multiple expansion accounted for roughly nine percentage points of their 23 percent annual TSR (Table 2).
Multiple expansion contributed significantly to accelerators’ TSR.
| TSR by type | Annual TSR, 2019-25 | TSR from multiple expansion | |
| Accelerator | ~23% | ~9 p.p. | Rerating was a major value creation lever |
| Other multiple growers | ~16% | ~4 p.p. | Operating performance remained important |
| Flat | ~9% | ~1 p.p. | Less multiple upside |
| Decreasing | ~11%1 | ~-4 p.p. | Multiple contraction offset performance |
Four actions that set the accelerators apart
The accelerators we studied didn’t follow one playbook. Quanta Services expanded through programmatic M&A and exposure to renewables, electric power, and data center infrastructure. Eaton reweighted its portfolio toward higher-growth electrical businesses while improving margins. Rockwell Automation used software, robotics, and automation acquisitions to strengthen its position in digital and connected-enterprise markets. Johnson Controls combined digital platform deployment, portfolio simplification, and restructuring. Cummins focused on the energy transition and power systems growth while restructuring lower-return activities.
But across the accelerators, there were four recurring patterns. First, accelerators made more moves than their peers, acting across several fronts at once during the period studied. Second, many set their ambitions higher than the average company, creating more new products and repositioning toward faster-growing markets and higher-value segments of the industrial landscape. Third, their new-market entry occurred predominantly through M&A. Finally, they were able to show investors what was working by demonstrating stronger operational performance.
Based on these patterns, we recommend that industrials seeking multiples expansion pursue one or more of the following actions:
Act on multiple fronts
Accelerators pursued broad multilever agendas. On average, they completed actions across three to four categories (including entering new markets, launching new products, and reducing operating costs), though the highest performers completed even more. Across these categories, accelerators performed a median of 4.7 actions, outpacing other multiples growers (Exhibit 1). Moves included reducing operating costs, launching new products, improving capital intensity, reducing the cost of goods sold, entering new markets, and accelerating commercial performance.
Accelerators pursued the most initiatives and, like growers, targeted slightly more cost actions than lower-performing peers.
Note: Analysis of 163 S&P 400 and S&P 500 industrial companies, 2019–25; accelerators (n = 52) expanded their enterprise value to EBITDA multiples faster than their industry median.
Both the efficacy of individual moves and the layering of moves mattered. A cost program alone may improve near-term margins, but it rarely changes the equity story. Similarly, growth initiatives without margin discipline can dilute returns. Investors may reward a compelling strategy, but sustained rerating usually requires evidence that the organization can deliver multiple initiatives in parallel while maintaining or improving margins.
Accelerating with multiple moves
nVent, an electrical infrastructure and power management company, illustrates how accelerators often pursue several reinforcing moves at once. Since being spun off from Pentair in 2018, the company used M&A to acquire businesses including ECM Industries, TEXA Industries, Trachte, and the Electrical Products group from Avail Infrastructure Solutions, expanding its presence in faster-growing electrical infrastructure, power management, and data-center-related markets. It sharpened the company’s focus on higher-growth segments by selling off its slower-growing thermal-management business and expanding into high-growth areas including liquid cooling, an increasingly important technology for data centers. By 2025, infrastructure-related businesses represented more than 40 percent of nVent’s portfolio, up from roughly 12 percent at the time of the spin-off.
The company also made its operations more efficient and expanded its margins. It invested in digital sales capabilities, including CPQ (configure, price, quote) tools that helped customers and sales teams configure products, generate quotes, and place orders more quickly, increasing both sales efficiency and conversion. At the same time, it improved profitability through component rationalization and SKU simplification, lean manufacturing, and lower logistics and freight costs.
Since the 2018 spin-off, the company’s EV/EBITDA multiple has expanded to 21 in the fourth quarter of 2025, from roughly 12 in the fourth quarter of 2018, reflecting a significant market rerating.
Create new products and move into faster-growing markets
The accelerators in our analysis pursued growth largely by changing how they competed. Twenty-three of the 52 accelerators launched new products, 21 entered new markets, 16 moved into a new step on the value chain, and seven expanded geographically (Exhibit 2). They did not simply add revenue but shifted their business mix. Some expanded from products into services, life cycle support, aftermarket offerings, or end-to-end solutions. Others moved vertically into components or specialized capabilities. These shifts can improve margin profile, increase customer stickiness, and demonstrate more durable growth to investors. Many of these moves were into areas of durable demand growth, including data center and digital infrastructure, energy infrastructure and renewables, aerospace and defense, automation, and engineered components.
Accelerators prioritized product innovation and commercial growth over geographic expansion.
Note: Based on 52 accelerator companies within an analysis of 163 S&P 400 and S&P 500 industrial companies, 2019–25; companies shown are illustrative examples, not an exhaustive list. Categories are not mutually exclusive, so shares do not sum to 100%.
Of course, opportunities to move into high-growth areas are easier to recognize in hindsight than they are to identify early enough to act on them. Research from the McKinsey Global Institute suggests that companies can improve the odds of identifying the next arenas of competition by looking for technology and business model shifts that coincide with investment races in large, rapidly evolving markets, creating opportunities for new leaders to emerge. But success depends not only on choosing the right arenas but also on having a credible right to win within them.
Accelerating by moving into new markets
Quanta Services, an infrastructure services company, illustrates how accelerators move into larger and faster-growing markets. The company used acquisitions including Cupertino Electric and Dynamic Systems to expand its capabilities in electrical infrastructure, data centers, advanced manufacturing, and other high-demand markets. At the same time, Quanta continued building capabilities tied to rising electricity demand and data center expansion. By year-end 2025, Quanta reported a record backlog of nearly $44 billion, reflecting strong demand for its services.
The company’s EV/EBITDA multiple has expanded from about eight in the second quarter of 2019 to more than 25 today.
Use M&A to rapidly reposition the business
The accelerators frequently used M&A to move quickly into new markets, products, and value chain positions (Exhibit 3). Acquisitions were particularly useful when companies wanted to expand into markets or capabilities that would have taken years to build organically. The most effective deals were not just about scale; they helped companies expand into faster-growing end markets, add specialized capabilities, move into adjacent parts of the value chain, or strengthen the overall portfolio. Companies that used programmatic M&A generally pursued a broader set of growth and operational actions and, in many cases, achieved higher multiple expansion.
Nearly 60 percent of accelerators used M&A to pursue initiatives, primarily to enter new markets and launch new products.
Note: Analysis of 163 S&P 400 and S&P 500 industrial companies, 2019–25; accelerators (n = 52) expanded their enterprise value to EBITDA multiples faster than their industry median.
Accelerating through M&A
Between 2020 and 2023, Rockwell Automation used acquisitions including Fiix, Plex Systems, and Clearpath/OTTO Motors to expand beyond traditional factory automation hardware into software-enabled manufacturing. Fiix added AI-enabled computerized maintenance management, Plex expanded Rockwell’s cloud-native manufacturing capabilities, and OTTO Motors strengthened the company’s position in autonomous robotics for industrial applications. Together, these acquisitions helped Rockwell expand further into faster-growing areas of industrial automation and digital manufacturing.
In the second quarter of 2019, Rockwell’s EV/EBITDA multiple was roughly 13. As of the fourth quarter of 2025, the company had a multiple of roughly 25.
Highlight the impact of actions on operating performance
One important finding from the analysis is that activity alone is not enough. Accelerators translated their agendas into stronger operating performance. From 20181 to 2025, the median accelerator grew revenue by about 37 percent, grew gross margins by roughly one percentage point, and expanded EBITDA margins by roughly six percentage points. Other multiple growers also improved both revenue growth and gross margins, but companies with flat multiples saw weaker margin performance and slower revenue growth, while those with decreasing multiples saw weaker margin performance and declining revenue (Table 3). In short, announcing a portfolio shift, launching a new product, or acquiring a capability doesn’t move the needle. The valuation effect depends on whether those moves contribute to faster growth, better gross margins, higher EBITDA margins, and a clearer path to sustained value creation.
Accelerators combined stronger revenue growth with greater EBITDA margin expansion.
| Company group | Revenue growth, 2018-25 | Gross margin change | EBITDA margin change | ROIC percentage change |
| Accelerators | ~37% | +1 p.p. | +6 p.p. | +6.3 p.p. |
| Other growers | ~33% | +2 p.p. | +4 p.p. | +5.4 p.p. |
| Flat multiples | ~23% | +0 p.p. | +2 p.p. | +2.7 p.p. |
| Decreasing multiples | ~-8% | -10 p.p. | -5 p.p. | +6.5 p.p. |
Accelerating with operational improvements investors can see.
Johnson Controls illustrates how accelerators make strategic repositioning visible to investors. The company used M&A to expand the capabilities of its OpenBlue building-performance software, simplified parts of its portfolio, and pursued restructuring and cost actions simultaneously. As those initiatives progressed, the company reported stronger orders, backlog growth, margin improvement, and expansion in digital building services, helping demonstrate that the transformation was translating into operating results.
In late 2018 and early 2019, Johnson Controls’ EV/EBITDA multiple was roughly ten. Today, its multiple is in the low to mid-20s.
Implications for management teams and investors
For industrial management teams seeking sustained multiple expansion, the findings suggest that no single initiative is likely to be enough. Management teams can enhance their chances of achieving accelerator quality outcomes by building the organizational capabilities and operating cadence needed to execute multiple initiatives at once. AI, including gen and agentic AI, can help companies execute these efforts faster by accelerating decision-making, streamlining workflows, and reducing the time required to move from strategy to execution. But as AI becomes widely available, simply adopting it is unlikely to create lasting competitive advantage. The greatest gains are likely to come from applying AI to the capabilities, assets, and operating models that already differentiate the business, allowing companies to extend advantages that competitors cannot easily replicate.
Our findings can help investors identify companies with the potential for sustained multiple expansion. Rather than focusing solely on end-market exposure, investors can look for management teams that are actively reshaping their portfolios, improving operations, entering attractive growth arenas, and demonstrating measurable progress through financial performance. For private equity investors who have the ability to influence strategy directly, the opportunity is greater still: to help portfolio companies pursue several initiatives simultaneously while using AI to accelerate execution in areas that build enduring competitive advantage.
Multiple expansion is ultimately a by-product of sustained value creation. The industrial companies that outperformed in our analysis did more than benefit from favorable markets. They combined exposure to attractive growth opportunities with deliberate management actions that improved growth, margins, returns, and portfolio quality, building investor confidence in the trajectory of the business.
