Industry Q&A – Marc Cooper & Solange Velazquez
M&A OUTLOOK: The State of the Trucking and Transportation Technology Sectors
by CEO Marc S. Cooper
Solange, I’m interested in learning more about your outlook for the trucking and transportation technology sectors.
The M&A outlook for these sectors has become increasingly optimistic as we look ahead to 2025. In the new year we expect to see a decrease in uncertainty, lower interest rates, and closer agreement between buyers and sellers on valuation expectations – all of which contribute to our positive views.
That’s great to hear. What are some of the key factors driving this optimism?
As activity has picked up, there has been a growing focus on high-quality assets with strong KPIs like growth, profitability, and retention. This shift has narrowed bid/ask spreads, making strategic acquisitions more feasible. Corporate strategics have also built up their share of transactions, climbing from 68% in 2019 to 80% in recent years.
Private Equity firms are now under immense pressure to return capital to investors and deploy record-high dry powder levels. The top 25 funds have a whopping $2.6 trillion to invest. We expect this pressure to fuel more M&A activity next year.
How is technology impacting the trucking and transportation sectors?
The complexity of fleet operations has made it critical for companies to adopt technology-based solutions. The US vehicle ecosystem contributes approximately $1 trillion to the country’s economy, with the fleet solution total addressable market (TAM) estimated at $96 billion.
Continued innovation and reduced costs have powered a new generation of technological solutions designed to improve fleet operations and efficiencies. These solutions process and analyze billions of vehicle and driver data points to generate insights such as efficient routing, driver safety, and predictive maintenance. However, less than 50% of fleets currently use this kind of transportation technology.
Driver safety and retention are critical issues. How is the industry addressing these concerns?
Driver-related expenses, including salary, benefits, recruiting, and insurance are among the fastest-growing fleet operating expenses. The trucking industry is prioritizing safety and driver well-being by incorporating solutions that combine traditional telematics data with real-time driver risk assessment and coaching, real-time alerts, cameras, training, and mobile apps for engagement and driver scoring.
The 90% turnover rate among drivers and the $8,000 per driver average cost of turnover underscore the importance of effective recruitment and retention strategies. Fleets are focusing on improving driver safety and behavior through technology, which is essential for reducing costs and enhancing operational efficiency.
How have market trends shifted in terms of transportation technology acquirers?
They have pivoted away from industrial consolidators toward well-funded technology-focused operators. This shift is driven by the need for advanced solutions that can address the increasing complexity of fleet operations. Private equity consolidators and well-funded tech innovators are leading the charge in acquiring and integrating these solutions.
Solange, it’s clear that the trucking industry is undergoing significant transformation. What’s your general outlook for companies in this industry?
The ones that can navigate these challenges and effectively leverage technology will be well-positioned for success.
To learn more, read our recent report: Transportation Technology Market Update
