Increasing Private Equity Interest in U.S. Shipbuilding and the Jones Act Market

Private equity has over the past 15 years played a key role in the U.S. maritime industry, and today's regulatory landscape in the U.S. makes the U.S. maritime industry ripe with further opportunity for private equity funds. With new legislative efforts and a government focus on supporting U.S. shipbuilding and the U.S. flag fleet, private equity funds – both U.S. and foreign – are looking for ways to capitalize on the resulting opportunities. Two areas stand out: the excitement generated by the Shipbuilding and Harbor Infrastructure for Prosperity and Security for America Act of 2025 (SHIPS Act) and the growing interest of foreign private equity firms in the U.S. Jones Act market.

Potential Opportunities from the SHIPS Act and U.S. Shipbuilding Initiatives

The Trump Administration and Congress both have expressed interest in strengthening U.S. shipbuilding capacity and modernizing U.S. maritime infrastructure. On April 9, 2025, the Trump Administration issued an executive order focused on revitalizing the U.S. maritime industry. Meanwhile, there has been bipartisan support in Congress for the SHIPS Act. If passed, the legislation would make significant investments in the U.S. maritime industry and expand requirements for the use of U.S. flag vessels in certain trades.

These developments present new investment opportunities for established private equity players active in the U.S. maritime industry as well as those new to the industry, and we have seen a wave of interest in the potential impact of the SHIPS Act. Among other things, investors – including private equity funds – are examining ways to invest in shipyard modernization and other U.S. maritime infrastructure, with the prospect of federal incentives and increased demand for U.S.-built vessels making potential investments more attractive. The SHIPS Act, if passed, would provide substantial federal funding for shipbuilding projects and likely lead to a surge in demand for modernized shipyards and new vessels.

Rising Interest from Foreign Private Equity Funds in the Jones Act Market

Alongside growing attention from U.S. funds, foreign private equity funds are also showing increased interest in investing in vessels and companies operating in the Jones Act trade. With its smaller size, aging assets and restrictive ownership requirements, the Jones Act market has historically seen limited interest from international investors, but this is changing.

Notably, however, the path to investment for foreign funds is not straightforward. The Jones Act imposes strict U.S. citizen ownership and control requirements on vessels that operate in the U.S. coastwise trade. For foreign private equity funds seeking to make investments in, or form joint ventures with, companies operating in the U.S. coastwise trade, ensuring compliance requires significant care and attention to how these investments are structured.

Foreign funds must undertake rigorous compliance assessments and partner with eligible U.S. operators to participate. Investments by foreign funds in the Jones Act are often structured as joint ventures with U.S. operators that preserve U.S. citizen ownership and control. These structures must be carefully designed and monitored to avoid exceeding the permitted foreign ownership thresholds and ensure that company management and control meet statutory requirements. Noncompliance can have severe consequences, including substantial fines and the potential loss of a vessel's eligibility for coastwise trade.

In addition to strict regulatory requirements, foreign private equity funds investing in the Jones Act market must also navigate different commercial expectations regarding the debt financing of Jones Act assets. While both U.S. and foreign sponsor-backed companies are often accustomed to debt financing arrangements that preserve maximum company flexibility, such terms are often significantly more borrower-friendly than those available from lenders financing Jones Act assets.

Despite these challenges, interest by foreign private equity funds in Jones Act investments continues to grow. With the increasing possibility of significant government support for the expansion and modernization of the U.S. maritime industry, anticipate this interest to grow further and expect both U.S. and foreign private equity funds to play a defining role in the future of the U.S. maritime industry.

Holland & Knight's experienced attorneys are here to help clients take advantage of these new opportunities. In the past year, we have significantly expanded our market-leading Maritime Finance Team to better assist U.S. and foreign private equity clients in navigating the complexities of the Jones Act market. We provide comprehensive guidance on compliance assessments, partnership formations and Jones Act-compliant joint venture structures, helping our clients achieve their investment goals while mitigating risks. For further information or updates on market trends, please contact any member of our team.