Winter 2019/2020 Focus on Automotive Industry M&A
The current trade tensions in China are expected to significantly impact the automotive market both globally and domestically. This is directly reflected by a noticeable decline in transaction volume, dropping roughly 20% from 2017 to 2018 when tensions began to ramp up and 26% from Q3 2018 YTD to Q3 2019 YTD.
There was a noticeable spike in original equipment manufacturer (“OEM”) transaction value exiting 2018 into 2019, with multiples rising approximately 33% from Q4 to Q1. In wake of trade negotiations with China, financial and strategic buyers are willing to pay premiums on part manufacturers and suppliers, knowing that demand for more affordable parts will not teeter off to the same extent as overall sales should these negotiations turn south. This premium was also driven buy increased interest in emerging markets like electrical vehicles and autonomous driving technology, with publicly traded OEMs placing a large focus in these areas.
Under current market conditions, several factors remain key in securing optimal valuations; including maintaining a strong and deep management team, implementing actionable growth strategies that mitigate product and customer concentration, and supplementation of attractive platforms like SUVs, pickups and crossovers.
To review the full report please download, Automotive Industry M&A Review Winter 2019/2020.