The fleet vehicle subsector is large, growing, fragmented, and underpinned by several tailwinds, including resilient growth in commercial and municipal services, consistent government funding, pent-up new chassis demand, and an aging fleet in need of increasing investment. And since fleet vehicles are often mission-critical and must remain in service as much as possible, related services see strong recurring demand. 

Below, senior professionals from our Transportation & Logistics Group and Industrials Group discuss the themes driving investor interest in businesses that serve the fleet vehicle segment and how Harris Williams client Safe Fleet exemplifies the opportunity. 

Increasing Demand With a Growing Focus on Safety and Productivity

Fleet operators spend steadily on new and used vehicles to grow and maintain their fleets. That’s especially true of municipalities, many of which are still updating and expanding their fleets in the wake of pandemic-driven purchase deferrals and supply chain disruptions. In addition, evolving emissions standards will accelerate demand in advance of adoption deadlines as certain operators seek to avoid purchasing and maintaining higher-cost, higher-complexity powertrains. Federal, state, and local support for public transit, school systems, and law enforcement is increasing, and fleet vehicle operators recognize that an aging, underinvested fleet is ill-suited to serve the growing demands in their markets. 

According to Joe Conner, a managing director in the Transportation & Logistics Group, pent-up demand for fleet vehicles can be seen in order books for manufacturers across the industry: “In many cases, a multiyear pipeline of orders is waiting to be filled, even though manufacturers are now largely back to normal production capacity.” 

Additionally, says Conner, over the last several years fleet managers have increased their emphasis on vehicle safety and productivity features. “Every new vehicle has increasing technology content designed to provide a safer, more efficient experience for drivers, passengers, and the public.”  

In this segment, product availability and quality at scale are paramount. “Leading companies have the product breadth, service orientation, scale, supply chain reliability, and geographic reach to provide all-in-one solutions and meet delivery timelines for large-scale purchasers,” notes Frank Mountcastle, a managing director in the Transportation & Logistics Group. 

The growing momentum behind certain electric fleet vehicles is also creating opportunities for market participants. While not appropriate for every application, route-based fleet vehicles with defined load and mileage requirements are logical candidates for electrification. Electric fleet vehicles bring with them higher technology content and additional revenue opportunities for participants in the fleet vehicle value chains. 

“Government subsidies and the push for green transportation and zero emission vehicles are driving EV adoption and increased spend across both municipal and commercial fleets,” explains Elliott Yousefian, a director in the Transportation & Logistics Group. “School districts are particularly notable purchasers of EV fleet vehicles with support from federal grants to replace aging buses with new electric models.” 

Safe Fleet: Addressing Increasingly Complex Needs

Against this backdrop, Safe Fleet has an especially relevant value proposition. The company provides safety, productivity, and connectivity products and services for fleet vehicles, including electro-mechanical solutions; digital and tech-enabled solutions; and upfitting, installation, and repair. It partners with fleet operators to integrate technology that achieves safety and productivity goals, and it offers fleet video solutions that heighten safety and serve the need for digital evidence. 

Safe Fleet’s strategy is to be a one-stop solution provider for any fleet-based vehicle operator. “Safe Fleet has the products to serve a wide range of needs and vehicle types, from school buses to refrigerated trucks,” says Yousefian. “It offers camera systems and sophisticated technology platforms for route optimization, asset tracking, and efficiency management, as well as essential vehicle components like load ramps, ladder racks, and firefighting equipment.” 

The company has built a portfolio of brands through a proven M&A playbook, acquiring niche product manufacturers that unlock value when added to its ecosystem. “Safe Fleet has integrated component manufacturers with sophisticated technology providers and software developers across a multitude of end markets, from law enforcement to school transportation,” says Mountcastle. “This variety of products appeals to fleet operators looking for integrated systems, driving cross-sell and significant organic growth.” 

In addition, Safe Fleet has made a large investment in a suite of innovative technologies and created new recurring Safety as a Service (SaaS) and cloud-based revenue streams. “Safe Fleet integrates software and hardware to create advanced interior and exterior passenger monitoring and video telematics solutions that promote productivity gains and ensure the safety of drivers, passengers, and pedestrians,” says Chris Toussaint, a director in the Industrials Group. “Its bundled suite of integrated SaaS solutions provides a compelling value proposition for its customers, while creating a high-margin, high-growth recurring revenue stream for Safe Fleet.” 

Lastly, the company is unique in its ability to effectively serve many fragmented markets. “Safe Fleet markets to end users and OEMs to adopt its high-value solutions, while maintaining the flexibility to complete installation in-house or sell comprehensive solutions to OEMs and third-party upfitters,” explains Conner. 

All Systems Go

The fleet vehicle subsector remains highly attractive due to its combination of stable growth, pent-up demand for new chassis, and an ongoing need for replacement vehicles, products, and services. At the same time, greater emphasis on fleet vehicle safety and productivity will support long-term growth for companies offering these solutions via new vehicles, specialized products, and software. 

As Safe Fleet shows, businesses able to provide integrated, high-quality solutions at scale will continue to make the most of this fragmented subsector’s potential, attracting strong investor attention in the process. 

To discuss the M&A potential across the space, please contact our senior professionals.