News & Resources

Material Handling Market Update | March 2024

A few weeks ago, the Alexander Hutton team attended MODEX 2024 in Atlanta. MODEX is the premier international material handling, logistics and supply chain show and conference, which this year brought together over 40,000 manufacturing and supply chain professionals from around the globe. During our time at MODEX we walked the show, met with existing AH clients, and had discussions about long-term transition goals with several business owners and private equity firms.

Alexander Hutton has been working in the Material Handling industry since 2018, working on several transactions during the Pre-Covid, Covid and post-Covid periods, which proved to be a wild ride indeed!  As everyone in the industry is aware, the impact of ecommerce and particularly Amazon on material handling has been tremendous, both in the upswing (2017-2022) as an influx of new warehouse systems were demanded, and more recently in the downshift as interest rates rose and demand eased (2023). Based on our conversations at MODEX, it seems that most players in the industry expect that activity will stabilize in 2024.
 
Most exhibitors and attendees agreed that Modex was a very fruitful show. Large buyers of material handling solutions have aggressively reentered the market, and they are executing on planned 2024 and 2025 capital expenditures. Amazon is reengaging in warehouse buildouts, pipelines of systems integrators are growing, and confidence within the industry is building.

More general economic trends have also contributed to this confidence, as the Federal Reserve has signaled a pause in interest rate hikes and consumer demand has increased. In an environment of stable interest rates, CFO’s can better anticipate their cost of capital to judge the returns of warehouse automation. Surprisingly, only 10% of warehousing stock in the US is currently automated. Given the costly impact of labor shortages, and the continuing advances in new technologies including software, robotics and AI that drive operational efficiencies, we believe that this industry optimism is well-founded.

There continues to be active interest in the material handling industry from capital providers, both strategic and financial, that seek to partner with operators to accelerate the growth of their businesses. The US has an estimated seven million private companies with owners over 55 years of age, and many of these owners will need to seek a full or partial sale in order to retire and ensure the successful ongoing operation of their business. The potential of a changing tax code that calls for a higher tax rate on capital gains, as outlined in the Biden administration’s new budget, may accelerate the timing of some of those transition plans.
 
At Alexander Hutton, we are optimistic about the long-term outlook of the material handling industry, and we continue to serve clients in this vertical. We will be in attendance at MHEDA in April. Please reach out if you think a discussion is worthwhile.

About Alexander Hutton

Led by a team of former business operators and executives who have built and sold companies, Alexander Hutton is a boutique, middle market M&A advisory firm that has completed 224 successful transactions. We offer a unique understanding of what it takes to run a business and an accessible team dedicated to client service. By running a high-touch, competitive transaction process for each of our clients, we are able to help them achieve their ideal outcome.

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