CEO Perspective: Traffic Management Market Dynamics
Baird Global Investment Banking recently connected with traffic management industry leaders at our Traffic Management CEO Summit in Chicago. Attendees enjoyed compelling industry discussions including a broader market discussion led by the Boston Consulting Group, a look at recent traffic management M&A activity and a financing market update. Additionally, industry leaders shared perspectives on current market dynamics and their outlook for near-term activity in the traffic management space.
Traffic Management CEO Summit Takeaways
- Infrastructure Spending Continues to Grow: The already-strong growth in the traffic management space is poised to get a boost from additional infrastructure spend. Operators are beginning to see the impact of federal infrastructure spending (i.e., the Infrastructure Investment and Jobs Act, or IIJA). While the pace of that spend has been somewhat slow to date and funding levels can vary drastically by state, there is reason to be optimistic: There is a longtail of projects in queue that are expected to be supported for at least the next 10 years with existing funding.
- M&A Activity Pacing Upward: M&A activity is beginning to see a recovery as sellers gain more conviction on taking assets to market. More normalized levels of activity are expected by mid-2024. There’s been continued activity for traffic management platforms and add-ons fueled by the success of industry leaders, private equity interest, strong market tailwinds and the industry’s resilience. Platforms are trading well into the double-digit multiples while add-ons are trading at single-digit multiples; however, competition for add-ons has become fierce with valuations rising for higher-quality businesses.
- Mission-Critical Project Growth: Large, professionalized businesses with track records of delivering high-quality service are performing more of the larger projects, as they are seen as less risky than their smaller counterparts. Additionally, outsourcing continues as the work of traffic management companies is seen as mission-critical to completing important infrastructure projects (i.e. building and repair of bridges and utilities) and comes at a relatively lower cost to the overall project.
- What Makes an Asset Best-in-Class:: Businesses that are garnering private equity interest have strong leadership teams, track records of organic and inorganic growth, integrated operations and branch networks, strong market positions in local markets and industry-leading financial metrics (i.e. revenue growth, margins, etc.).
Baird’s Facility, Industrial, Residential & Environmental Services (FIRE) practice covers a vast array of critical non-deferrable services, including Traffic Management. Connect with our team to learn more.