Due to its recession resilience and favorable tailwinds, the auto aftermarket offers persistent investor appeal across economic cycles. The consumable products category also represents a stable demand profile that extends beyond the automotive aftermarket to industrial applications requiring specialized formulas with consistent availability.

Below, senior professionals from our Transportation & Logistics Group and Industrials Group discuss the key trends driving M&A activity in the consumables segment of the auto aftermarket and broader industrials industry, with a particular focus on the traits that made Harris Williams client Recochem a sought-after investment opportunity.

Resilient Demand & Growing Automobile Use

The automotive and heavy-duty aftermarket is large and fragmented with substantial consolidation opportunity. In addition, the sector has many desirable attributes, including long-term stability of growth and demonstrated recession resistance. Joe Conner, a managing director in our Transportation & Logistics Group, says that automotive products are consumable, needs-based, and routine maintenance items, which leads to predictable demand even during economic turbulence. “It’s a sector that consistently outperforms the broader economy,” he adds.

This steady demand is bolstered by significant tailwinds. A growing number of vehicles in operation, along with increasing miles driven, rising average vehicle age, a shift to larger vehicles, and expanding vehicle complexity all contribute to greater consumption of increasingly specialized aftermarket products and services.

The consumables segment is a particularly attractive area within the auto aftermarket. “Like many auto aftermarket parts, coolant, windshield wash, diesel exhaust fluid, and other car care products are essential items for vehicle operation,” says Elliott Yousefian, a director in our Transportation & Logistics Group. “Because they are consumed predictably and replaced on a specific timeline, there is consistent demand for these fluids. These traits contributed to Recochem’s appeal during its recent transaction.”

Recochem: A Leader in Essential Auto Fluids

Recochem is a global leader in the manufacturing, marketing, and distribution of automotive aftermarket and household fluids.

Jeff Kidd, a Transportation & Logistics Group managing director, notes that Recochem’s robust product portfolio—including a mix of owned, licensed, and private-label brands—and range of customer relationships are examples of its many strengths. “The company’s solutions focus enables it to meet a wide array of customer needs in order to serve evolving technology needs and consumer preferences,” he explains.

Recochem also has a diverse B2B, B2C, and e-commerce channel strategy. Yousefian notes that its omnichannel approach is highly effective. “The company’s customers range from large fleets to individual vehicle owners,” he says. “It sells in bulk to commercial accounts, as well as in individual packages found on the shelves of automotive and big-box retailers. Its products are available everywhere there is a consumer need.”

Other differentiators include the company’s end-to-end vertically integrated model and in-house R&D expertise, which allow it to focus on innovation and continuous improvement. “Many businesses offering consumables are primarily brand marketers with outsourced manufacturing,” explains John Lautemann, a managing director in our Industrials Group. “Businesses like Recochem that provide differentiated, engineered solutions designed to meet specific customer needs are deeply valued by customers and investors alike."

“With its R&D capabilities, Recochem works alongside customers to develop formulations that best fit their specific needs regarding application, branding, and price point,” adds Kidd. In fact, Recochem’s commitment to new product development is a key pillar in the company’s operating and growth strategies, allowing it to ensure better product quality, develop new revenue opportunities, and enhance functionality to add more products to the platform.

Ubiquity & Scale

Given the fragmentation in the auto aftermarket and broader consumables segment, there is ample opportunity for businesses to generate significant growth through M&A.

Leaders stand out by participating in multiple areas of the market. These sought-after companies have a broad, differentiated product portfolio, serving businesses and consumers with solutions that meet specific needs. “They make their products available through multiple channels to suit the individual requirements of each customer, ensuring that vital consumables are available when needed to keep vehicles on the road and businesses running,” explains Lautemann. “Achieving this level of distribution and reach requires strong R&D, sales, marketing, production, and fulfillment capabilities.”

Yousefian adds that high-performing businesses in the segment have proven strategies to grow organically and through acquisitions. For example, when Recochem acquired Adam’s Polishes, the transaction gave Recochem entry into e-commerce while giving Adam’s access to store shelves. “Leaders know how to leverage their core capabilities across acquired businesses to generate the maximum benefit from the combined entity,” he says.

Paths to Differentiate

The consumables category will continue to generate strong investor interest within automotive aftermarket applications and beyond. “Across the landscape, we continue to see avenues for differentiation and many ways to generate long-term growth,” says Conner. “The future is bright for businesses that serve predictable, needs-based demand in attractive, highly fragmented markets like the automotive aftermarket.”

For further discussion on M&A opportunities in the auto aftermarket, please contact our senior professionals.