The United States is entering what may be the largest infrastructure and defense recapitalization cycle in modern history. Trillions of dollars in committed federal spending, a generational skilled-labor crisis, and accelerating supply chain reshoring are converging to create a market environment that will produce clear winners and casualties over the next decade. For acquisition-minded operators and investors, the question is not whether opportunity exists in these sectors—it is whether they can move fast enough to capture it before the consolidation wave prices them out.

This briefing examines five interconnected theses for why defense-adjacent, infrastructure, and trades businesses represent the most compelling acquisition targets in the lower middle market today.

1. The Coming Wave of Defense Supply Chain Consolidation

The defense industrial base is undergoing its most significant structural shift since the “Last Supper” consolidation of the 1990s. But this time, the pressure is not coming from shrinking budgets—it is coming from a supply chain that cannot keep pace with demand. The U.S. defense budget reached approximately $850 billion for 2025, and spending is expected to rise further heading into 2027. Meanwhile, Europe’s NATO members are projected to spend €800 billion on defense by 2030, nearly doubling equipment spending from 2025 levels. The money is there. The capacity is not.

The real crisis lives at Tier 2 and Tier 3 of the supply chain. Decades of consolidation among prime contractors created an environment where lower-tier suppliers had shrinking order books and little incentive from primes to maintain redundancy. Many of these smaller companies have quietly gone out of business. A Deloitte 2026 outlook report noted that persistent demand growth alongside shortages of materials and skilled labor will keep the aerospace and defense supply chain under pressure through at least 2027. The Defense Logistics Agency is actively reshaping its acquisition model from compliance-driven to speed-and-capability-driven, explicitly moving toward a wartime posture.

What does this mean for acquirers? Small and mid-sized manufacturers that machine precision components, produce specialty chemicals, fabricate metal assemblies, or provide maintenance and repair services for defense platforms are becoming strategic assets. Many of these businesses are family-owned, run by aging operators who lack succession plans, and sell at 3–5x EBITDA in normal markets. But their strategic value to the defense industrial base is growing exponentially. An acquirer who can roll up a portfolio of these Tier 2/Tier 3 suppliers—and bring operational discipline, digital visibility, and surge capacity—is building something that primes and government integrators will pay a premium to access.

The bottom line: The defense supply chain is fragile, demand is surging, and the government is actively seeking to rebuild domestic manufacturing capacity. Tier 2 and Tier 3 suppliers are the acquisition sweet spot—undervalued today, strategically essential tomorrow.

2. Why America’s Trades Shortage Is an Acquisition Opportunity

The construction industry alone needs an estimated 349,000 net new workers in 2026 just to maintain current output, with that number expected to climb to 456,000 in 2027. Roughly one in five construction workers is over the age of 55. The pipeline of younger workers entering the trades is not keeping pace with retirements. BlackRock recently committed $100 million through its Future Builders program specifically to address the skilled trades shortage, aiming to train 50,000 Americans over five years—a signal of how seriously institutional capital views the structural labor deficit.

Construction wages have continued rising, with average hourly pay reaching $40.55 in January 2026, a 3.8% increase year-over-year, and weekly earnings approximately 25% higher than the average private-sector worker. Skilled trades related to infrastructure are projected to grow at 5% over the next decade, significantly outpacing the 3% national average. The Bureau of Labor Statistics projects 4% to 60% growth across various skilled trade categories through 2033, depending on the specific role.

For acquirers, the labor shortage creates a paradox that is actually an advantage. Owners of trades businesses—HVAC, plumbing, electrical, excavation, concrete, roofing—are exhausted. They cannot find enough workers. They are burning out trying to manage dispatch, scheduling, estimating, and customer communication alongside field work. Many of these owners are in their late 50s and 60s with no succession plan and no appetite for another five years of grinding. They want out. That creates motivated sellers at reasonable valuations.

Simultaneously, the acquirer who can centralize back-office functions, professionalize recruiting and training pipelines, and deploy technology across a portfolio of trades businesses creates a structural competitive advantage. The labor shortage is not going away—it is a permanent feature of the market for the foreseeable future. That means the businesses that survive and thrive will be the ones with scale, systems, and the ability to attract and retain workers through career development, better benefits, and operational efficiency. Acquisition is the fastest path to building that kind of platform.

The bottom line: The labor shortage is creating a generation of burned-out sellers and simultaneously rewarding scale and operational sophistication. Acquiring trades businesses now means buying into a market with rising wages, persistent demand, and a structural barrier to new competition.

3. How the Infrastructure Investment Act Is Creating Motivated Sellers

The Infrastructure Investment and Jobs Act authorized $1.2 trillion in total spending, with $550 billion in new federal investment flowing through fiscal years 2022 through 2026. That money is hitting the ground now—roads, bridges, broadband, water systems, electric grid upgrades, and transit. FMI Corp estimates that nearly all of these funds are directed into engineering- and construction-related fields. The IIJA, combined with the CHIPS and Science Act and the Inflation Reduction Act, has catalyzed over $1 trillion in private investment alongside the federal spending.

Here is the counterintuitive dynamic that most people miss: this flood of work is not uniformly good for small construction and infrastructure companies. Many of them cannot absorb the volume. They lack the bonding capacity, the working capital, the workforce, and the project management sophistication to bid on and execute significantly larger contracts. Project Labor Agreements are now mandatory on federal projects over $35 million, adding compliance complexity that smaller operators are not equipped to handle. Buy America requirements mandate domestic sourcing of iron, steel, and manufactured products, increasing procurement complexity.

The result is a two-speed market. Large, well-capitalized firms are feasting on IIJA-funded work. Small and mid-sized operators are watching opportunities they cannot chase pass them by, while simultaneously facing wage pressure and materials cost inflation that squeezes their margins on existing work. Many of these owners are reaching the rational conclusion that now is the time to sell—while their backlog looks strong on paper and before the post-IIJA funding cliff arrives. The IIJA authorization runs through September 2026, and reauthorization conversations are just beginning. Smart owners know the window to exit at attractive multiples will not stay open forever.

The bottom line: The IIJA created a surge of work that is overwhelming small operators and simultaneously making their businesses look attractive on a trailing-revenue basis. Acquirers who move now can buy businesses with inflated backlogs at valuations that reflect the owner’s fatigue rather than the business’s forward potential.

4. Fiber Infrastructure Buildout — Who’s Selling and Why

The broadband buildout is the largest single infrastructure deployment happening in America right now, and it is creating a massive wave of M&A activity. The BEAD program alone represents $42.5 billion earmarked for broadband deployment to underserved areas. AT&T has now passed 30 million homes with fiber and is targeting 60 million by decade’s end, having acquired Lumen’s Mass Markets fiber business for $5.75 billion. Verizon’s $20 billion acquisition of Frontier Communications received FCC approval in 2025. Alphabet just announced it is spinning off GFiber and merging it with Astound Broadband, creating a combined national platform covering approximately 7.1 million locations across more than 20 states. T-Mobile has closed acquisitions of Lumos, Metronet, and U.S. Internet in rapid succession.

The mega-deals get the headlines, but the real acquisition opportunity is one layer down: the companies that actually build fiber networks. The directional boring crews, the splicing teams, the conduit installers, the aerial construction companies, the utility locating firms. Building a fiber network requires two components—constructing the underground (or aerial) physical plant, and then acquiring customers on it. The construction side is where capacity is most constrained, and it is where smaller operators with equipment, trained crews, and local market knowledge are worth their weight in gold.

Many of these fiber construction companies are small, privately held, and run by owners who built them to serve a regional telco or cable company. They may have 15 to 100 employees, a fleet of bore rigs and bucket trucks, and a highly skilled workforce that is nearly impossible to replicate from scratch. As the BEAD money flows and ISPs ramp their build programs, these companies are being pulled in every direction. Some owners see this as the best exit window they will ever get—their backlogs are full, their revenue is at all-time highs, and they know the work surge is temporary.

The bottom line: The fiber buildout is a multi-year, multi-billion-dollar construction project happening across every state simultaneously. The ISPs are consolidating. The construction companies that build for them are the next domino. Acquirers who assemble a regional or national fiber construction platform now will own an asset that every carrier and PE-backed ISP needs.

5. Why Earthmoving Companies Are Undervalued Right Now

Earthmoving and excavation companies occupy a unique position in the construction value chain. They are the first contractor on virtually every project—before the foundation is poured, before utilities are run, before any structure goes vertical, someone has to move dirt. This essential positioning, combined with heavy capital requirements for equipment and the difficulty of finding qualified operators, creates natural barriers to entry. Yet earthmoving companies consistently trade at lower multiples than other specialty contractors.

The reason is largely perceptual. Buyers and brokers see dirty equipment, gravel yards, and blue-collar workforces and apply commodity-business multiples. They see the capital intensity—a new 20-to-30-ton excavator runs $200,000 to $600,000, with standard dealer financing at 7.5% to 10.5% for well-qualified borrowers and significantly higher for smaller operators—and assume thin margins and high risk. What they miss is the asset base. An earthmoving company’s equipment fleet often represents 50% to 80% of the total enterprise value, meaning the acquirer is effectively buying the operating business at a deep discount when the deal is structured around appraised equipment value.

The heavy equipment M&A market is accelerating. Private investment in industrial equipment and machinery grew 3.8% to $841.7 billion in 2025, and the global construction equipment rental market is valued at $151.6 billion with growth projected into 2026 and beyond. Private equity firms are actively running roll-up strategies in this space, combining smaller operators into more competitive organizations. Technology is also driving acquisitions, as companies target firms with telematics, GPS fleet management, and digital estimating capabilities.

For the independent acquirer, the opportunity is in the used equipment economics. A three-to-five-year-old machine with modern Tier 4 or Tier 5 engines represents the value sweet spot—machines in that age range have absorbed the steep first-year depreciation curve but still carry thousands of hours of productive life. An acquirer who structures a deal around equipment appraisal values, uses asset-based lending against the fleet, and factors receivables from active contracts can often acquire an earthmoving company with minimal out-of-pocket capital while gaining immediate access to a revenue-generating operation backed by hard collateral.

The bottom line: Earthmoving companies are the entry point for every construction project in America, backed by tangible equipment assets, yet they trade at valuations that understate their strategic importance. The combination of infrastructure spending tailwinds, asset-heavy balance sheets that support creative deal structures, and aging ownership makes this subsector one of the most attractive pockets in the entire lower middle market.

Conclusion: The Window Is Open

These five theses share a common thread: structural demand that is not cyclical, a generation of owners nearing retirement with no succession plan, and valuations in the lower middle market that have not yet caught up to the strategic reality. Defense reshoring, infrastructure spending, broadband deployment, and the trades labor crisis are not short-term trends. They are decade-long megatrends backed by hundreds of billions in committed capital.

The acquirers who move decisively in 2026 and 2027—assembling platforms in Tier 2 defense supply, trades services, fiber construction, and earthmoving—will be positioned to ride the largest reindustrialization wave the United States has seen since the postwar era. The window is open. The question is who will walk through it.

Disclaimer: This briefing is for informational purposes only and does not constitute investment, legal, or financial advice. Market conditions, regulations, and deal dynamics change rapidly. Readers should conduct independent due diligence and consult qualified professionals before making acquisition or investment decisions.