
Article - July 18, 2023
Transportation Infrastructure: Diverse Opportunities, Powerful Tailwinds
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Across economic cycles, businesses that combine earnings visibility, defensibility, and stable long-term demand are highly attractive to M&A investors. Companies within transportation infrastructure often exemplify these traits, presenting investors with significant potential to create value.
In recent years, Harris Williams has worked with several leading transportation infrastructure businesses, gaining an in-depth understanding of the most important differentiators and value drivers. Here, we share insights drawing from this experience.
Expanding Investor Interest
“Within the T&L space, we have traditionally seen infrastructure investors focus on asset-oriented companies such as rail or marine operators,” says Jason Bass. “Now, given recognition of the supply chain as a critical component of the global economy, we’re seeing more interest in a wider range of businesses across transportation modes.”
In particular, ports, port terminals, and nearby warehousing and transload capacity are gaining investor interest. In these areas, real estate strategy is critical to customer service levels and provides attractive barriers to entry from potential competitors. That supports revenue defensibility and resiliency, core themes in infrastructure services investing.
Joe Conner says the most attractive transportation infrastructure businesses can prove revenue resiliency across economic cycles and attractive returns on invested capital through efficient deployment of owned equipment. One example is Carolina Marine Terminal, a Harris Williams client that owns a marine port terminal and surrounding real estate. Its buyer is a joint venture between infrastructure investor Ridgewood Infrastructure and Savage, a global transportation and materials handling company.
Intermodal logistics is another area gaining visibility among investors due to growing container volumes, rising freight velocity, and the disruption caused by post-COVID-19 port congestion. Three Harris Williams clients serve as examples: STG Logistics, RoadOne IntermodaLogistics, and The Evans Network of Companies.
STG Logistics is a leading provider of container logistics and warehousing solutions at major ocean and airports throughout the U.S. STG Logistics saw infrastructure fund Oaktree Capital Management partner with Wind Point Partners to acquire XPO Logistics’ Intermodal Division, creating a port-centric provider of end-to-end domestic containerized logistics solutions.
“STG has a competitive advantage with the proximity of its facilities to the ports,” says Frank Mountcastle. “It has scale and the ability to tap into a network of flexible, multimodal capacity to move goods quickly and cost effectively through the supply chain. It also has a highly diversified customer base, serving customers in every industry.”
RoadOne IntermodaLogistics is the largest independent provider of intermodal logistics solutions in North America. It offers single-source solutions for port and rail container drayage, transloading, and related logistics support services.
The company has a national footprint of service centers and transload facilities, with density in key markets and an asset-light network of approximately 2,000 drivers. RoadOne is also diversified in its service offerings. While the company predominantly offers intermodal drayage, it also provides additional complementary services. For example, RoadOne’s transloading services help manage goods between the port and the truck.
RoadOne has grown organically but also through acquisition. “RoadOne is a leading consolidator in this large, highly fragmented intermodal logistics industry,” says Nick Petrick. “Companies trust that RoadOne will keep the culture being acquired in place.”
The Evans Network of Companies is a leading, non-asset-based logistics platform to a large and growing agent network serving the fragmented intermodal transportation and domestic truckload markets. The company provides outsourced back-office functions from billing and collections to compliance, insurance, risk management, and IT solutions to its agent network. This enables these agents to focus on their core activities of selling freight and dispatching freight capacity to their customers.
Evans serves highly fragmented, diversified markets, each with substantial runway for growth. Its technology-enabled platform provides agents with a variable cost model that can scale as they grow. “The company has continually invested in its IT platform, enhancing its capabilities and increasing its value proposition for stakeholders,” says Mountcastle. “It has highly flexible, scalable systems and solutions capable of supporting its growth trajectory with minimal additional investment required.”
Conclusion
Harris Williams has worked with a wide variety of leading businesses in transportation infrastructure, from owners of ports to railcar services providers to specialists in intermodal logistics. While diverse in nature, all share elements of the earnings visibility, defensibility, and long-term demand investors seek. To learn more about opportunities in this exciting area, please contact our senior bankers.
Featured Engagements
Contacts
Jason Bass
Group Head
Managing Director
Frank Mountcastle
Group Head
Managing Director
Joe Conner
Managing Director
Jeff Kidd
Managing Director
Jon Meredith
Director
Nick Petrick
Director