Asset-Light 3PL M&A Update – April 2024

Slow Asset-Light 3PL M&A Activity, But Emerging Signs of Improvement in 2024

Capstone’s latest Asset-Light 3PL M&A Update reports it has been a difficult operating environment for third party logistics (3PL) providers since mid-2022, tempering merger and acquisition (M&A) activity over the period. Capstone expects the pace of 3PL M&A activity to improve in the later part of 2024 as an acceleration in freight growth improves sector financial performance and brings more buyers and sellers to market.

Not only has growth been a challenge, but sector participants have had to adapt to a rapidly changing and increasingly complex environment as major shifts in global supply chains and accelerated e-commerce demand shape the ecosystem. On the bright side, the increased complexities and challenges also present opportunities and are expected to drive more logistics outsourcing by shippers. 3PLs embracing advanced automation and analytics technologies are well positioned to capitalize on these trends.

Asset-Light 3PL M&A activity has softened since the second half of 2022 as the ongoing freight recession negatively impacted profitability of most 3PLs over the period, leading many potential sellers to hold out for improved market conditions. A shift in consumer demand from a relatively high goods-heavy mix during the pandemic and back to a more service-heavy mix starting in the second half of 2022 resulted in depressed shipping demand, which exacerbated excess capacity and led to lower sector pricing. Asset-Light 3PLs with exposure to the broader freight markets saw revenue declines of more than 20% on average in 2023, according to Capstone Partners’ Asset-Light 3PL Index. Asset-Light 3PL M&A volume fell to pre-pandemic levels in 2023, with 45 transactions announced or completed, marking a year-over-year (YOY) decline of 26.2%. Deal volume in the Asset-Light 3PL sector is expected to rise later in 2024 with anticipated Federal Reserve easing and the freight market expected to tighten with improved demand. Structural sector growth trends continue to be favorable and are expected to drive a steady flow of M&A activity over the long-term.

Certain segments of the ecosystem have bucked the negative trend. Notably, Reverse Logistics service providers have greatly benefitted from elevated e-commerce sales and associated returns as well as retailers’ increasing focus on ways to improve profitability through their liquidation operations. As the Reverse Logistics ecosystem matures, we expect the implementation of more tech-enabled solutions, more consolidation, and larger platforms to define the segment.

Also included in this report:

• An exclusive interview with FreightPlus CEO Stephen Aborn discussing sector trends and technological advancements.
• Drill down of dynamics affecting key subsectors: Freight Brokerage; Freight Forwarding; Warehousing & Fulfillment.
• Growth and evolution of the Reverse Logistics segment with commentary on select segment transactions.
• Insights into Asset-Light 3PL public company performance in 2023.

Capstone Partners’ Transportation & Logistics Investment Banking Team provides M&A, capital formation, and financial advisory services to the owners of middle market businesses in the T&L industries. Our team partners with leading mid-to-large sized Asset-Light 3PL businesses that serve growing end-markets. For more information on the 3PL market trends featured in this report or to speak with one of our Transportation & Logistics Investment Banking Team members about how to grow, value, and/or sell your company, contact us today to start a conversation.