Global Automotive M&A Deal Activity Is Expected To Exceed 500 Deals By Year End, Reports PricewaterhouseCoopers

NEW DELHI, 07 August 2008: Global automotive M&A deal volume in the first half of 2008 remains relatively strong based on data analyzed by PricewaterhouseCoopers. The market still appears to be on course to exceed 500 closed deals for the 10th of the past 11 years, as was anticipated in Drive Value, PricewaterhouseCoopers' 2007 Automotive M&A insights publication.

The global credit crunch and economic downturn in the U.S. has led to a decline in deal volume from the high levels seen in 2007. However, the first half of 2008 shows activity similar to the same time period in 2005, and represents only a slight decline from the average first half of the year deal volume between 2005 and 2007. A total of 289 deals and disclosed value of $13.2 billion were closed in the first half of 2008, compared to 333 deals and disclosed deal value of $19 billion in the first half of 2007. Overall disclosed deal value has fallen 30% from the first half of 2007 and is down 25% from the average first half of the year's disclosed deal value during the prior three years.

“It is difficult to compare 2008 to the activity of 2006 and 2007 because they were booming years for automotive deals," said Abdul Majeed, India automotive practice, PricewaterhouseCoopers. "With the decline of 'mega-deals', there has been a large decline in the overall disclosed deal value. However, deal volume has seen only a moderate decline."





During the first half of 2008, disclosed deal value in the component supplier sector was $3.1 billion, down 55%, compared to $7 billion in the first half of 2007. In 2007, seven supplier M&A deals totalled more than $1 billion each, and two of these mega-deals came in the first half of that year. In contrast, there were no supplier deals over $1 billion in the first half of 2008. However, first half 2008 component supplier deal volume declined only 19% from the first half of 2007, and remains relatively flat compared to the first half of 2005 and 2006.

"Historically, transactions in the second half of the year represent a larger proportion of full year deal value," said Abdul. "Therefore, the total disclosed deal value for the first half of 2008 may not accurately project year-end figures."

In 2008, automotive M&A activity is primarily being driven by trade buyers, whereas financial buyers remain largely on the sidelines. Financial buyer activity significantly decreased in both deal volume and disclosed value. Financial buyer deal volume declined 58%, to 34 deals compared to 80 deals the same period a year ago. Their disclosed deal value declined 72%, a $5.9 billion decrease versus the same time period in 2007.






The three largest disclosed deals combined to account for almost $8 billion, or more than 50% of the total disclosed deal value for the first half of 2008. Total 2008 deal value could grow significantly if a major transaction is closed in the second half of the year.

On a regional basis, Asia and the U.S. had similar levels of deal activity, with Asia recording 73 transactions with a disclosed value of $2.2 billion and the U.S. recording 82 transactions with a disclosed deal value of $2.0 billion. If regional disclosed value trends persist for the rest of 2008, the U.S. share of global disclosed deal value will be at its lowest level in the past seven years.

A strong level of outbound deal flow from Asia suggests that automotive companies in developing markets are poised to accelerate expansion into the global marketplace.

Abdul added, “Looking at the attractive value of some of the assets of Global OEMs / Auto component suppliers, the Indian automotive companies will look for acquiring assets in the overseas market, both in Europe and North America to increase their global footprint".

The devaluation of the U.S. dollar has not attracted increased foreign investment to date. This is likely the result of weakness in the U.S. economy and its automotive market, which appears to be causing would-be acquirers to reconsider or delay U.S. M&A investments until they have more clarity about the magnitude of downside risk.



"The automotive sector continues to restructure in response to the challenges of a changing global economy. Managing rising commodity costs and manufacturing footprint realignment will be keys to success in the global automotive industry in the next decade. M&A continues to play a major role and serves as a catalyst to help advance this transformation of the industry.” concluded Abdul.

Notes to Editor:

For more information on PwC's automotive deal capabilities and to download Drive Value, PricewaterhouseCoopers' 2007 Automotive M&A insights publication, visit: www.pwc.com/auto

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