Despite uncertainty in some parts of the market in 2023, many Harris Williams clients in transportation and logistics generated strong attention from investors, highlighting the continued attractiveness of high-quality, differentiated businesses with defensible market positions and resilient revenue.

Looking ahead, we’re encouraged by moderating inflation, a resilient labor market, a positive stock market trajectory, healthy company earnings, and stable interest rates. At the same time, we are closely watching macroeconomic conditions and potential market disruptions, including the upcoming U.S. election and ongoing global geopolitical conflicts. Read more about the trends impacting the overall market >

New Growth Opportunities in 2024

Against an uncertain macroeconomic backdrop, several transportation and logistics segments continue to generate strong investor attention, including third-party logistics (3PL), transportation infrastructure services, and multiple subsectors of the automotive aftermarket. Tech adoption is creating new growth opportunities, particularly in the 3PL space, where many shippers and 3PLs are digitizing their supply chains.

Looking ahead, the transportation and logistics industry’s combination of established and emerging growth drivers will continue to attract a diverse set of investors in 2024, particularly as economic conditions continue to improve.

Investors Prioritizing Value-Adding 3PLs 

While the 3PL sector has faced macroeconomic challenges throughout 2023, many providers continue to find ways to add value to their shipper partners, generating resilient investor interest. That’s especially true for 3PLs offering tech-enabled, consultative approaches while differentiating on themes like onshoring, ESG, and cybersecurity. Investors are also prioritizing 3PLs with end-market expertise in stable areas like food and beverage or consumer goods, and with steady streams of contracted revenue that offer insulation against macroeconomic volatility. 

One example is Lazer Logistics, a leader in mission-critical outsourced yard management and facility logistics. Harris Williams has advised the company in its two most recent sales, through which it has become a top M&A target within the T&L landscape. The company’s expansion into attractive new markets and service lines and its focus on ESG drove strong buyer interest.

TIS Providing Stable, Recurring Revenue

The transportation infrastructure services (TIS) subsector continues to attract investors seeking stability and recurring, highly visible revenue with strong barriers to entry. For example, RoadOne IntermodaLogistics is the largest independent provider of intermodal logistics solutions in North America, offering port and rail container drayage, transloading, and related logistics support services. Its national presence across major seaports and inland ports offers valuable differentiation in an industry that has historically been highly fragmented and localized.

Auto Aftermarket Demonstrating its Resilience

Many subsectors of the automotive aftermarket have also proved to be resilient—both in terms of company performance and M&A—and we expect this to hold true in 2024. Investors continue to appreciate the aftermarket’s margins, free cash flow, fragmentation, and opportunities to professionalize operations and increase operating leverage via M&A. They also highly value its combination of downside protection with growth potential.

For example, we continue to see increasing interest in the aftermarket services space among private equity buyers, most recently illustrated by our advisory work on VIVE Collision and Magnolia Wash Holdings. The supplier and product distribution subsectors also continue to attract investors despite some challenges related to supply chain disruptions and inflation. These subsectors feature steady, consistent revenue driven by the aging and growing car parc, increasing miles driven, and non-discretionary break/fix demand drivers, especially attractive themes in uncertain economic conditions. As an example, Recochem makes, markets, and distributes essential automotive fluids, providing buyers with an exciting opportunity to tap into these resilient demand drivers.

Looking Ahead

Technology continues to create new growth opportunities, particularly in 3PL. Most shippers and 3PLs are digitizing their supply chains to keep pace with rapidly expanding ecommerce and omnichannel shopping, ensure on-time availability of products, and minimize warehousing and logistics costs. This creates substantial potential for 3PL-focused tech companies and for tech-forward 3PLs—although human ingenuity and relationships will always be powerful differentiators in the space. 

Another trend to watch is increasing sophistication and scale in the parts subsector and resulting interest from investors. Specifically, in a world of cost containment, supply chain disruption, and growing environmental concerns, the recycled parts subsector provides a crucial source of replacement parts in addition to being a reliable source of feedstock for several important recyclable commodity markets.  

Most importantly, many of the long-term trends driving growth and investor interest in transportation and logistics are poised to intensify and create significant new opportunities throughout 2024. This combination of established and emerging growth drivers will continue to attract attention from a diverse set of investors. 

To discuss M&A opportunities across the transportation and logistics industry, please contact our senior professionals.