According to Houlihan Lokey’s recently released Q3/23 equipment-as-a-service market update, the rate of announced equipment-as-a-service transactions in the year-to-date period for the report outpaced pre-COVID-19 pandemic levels, while noting that Q3/23 was a sequentially slower quarter.

The report noted that noncore acquisitions were a major theme of the first three quarters of 2023, with many companies and financial sponsors entering new segments and geographies in the pursuit of more attractive end markets. As an example, Houlihan Lokey acted as exclusive financial advisor to Flex Fleet Rental, a provider of pickup truck rentals, on its acquisition by Kaizen Automotive Group, a multi-jurisdictional automotive dealership.

Private equity was a major driver of acquisitions in the sector during the first three months of 2023, with the report noting that many groups pursued opportunities in various specialty equipment segments of the equipment-as-a-service space. Houlihan Lokey provided the example of private equity group ZMC, which it worked with as exclusive financial advisor in acquiring InProduction, a provider of temporary structures for live events.

Lastly, Houlihan Lokey said that record profits in 2021 and 2022 is putting on pressure on portfolio companies to “prove out” their growth as more than a temporary market-wide buoy.