PwC's Deals Sector Leader John Potter and other partners discuss the deals outlook for 2022.
The automotive market in 2021 has continued to track on its 2020 path of new-energy vehicle (NEV) M&A primarily fueled by special purpose acquisition company (SPAC) transactions. Of the top 10 global M&A deals announced, six were SPAC deals ranging from electric vehicle (EV) manufacturers (design and testing phase) to EV charging solutions. Meanwhile, macroeconomic headwinds have plagued the industry in 2021 with increasing commodity costs and a perfect storm of semiconductor supply-chain interruptions causing production shortages that could cost the overall global industry more than $100 billion.
Global M&A hit historical highs in 2021 with a total deal value of $136.6 billion — up 111% over 2020. While the onset of the pandemic significantly impacted deal value and volume in 2020, M&A activity recovered and accelerated with deal volume in 2021 up 19% to 971 deals with an average disclosed deal size of approximately $435 million.
Of the $136.6 billion of deal value, vehicle manufacturers comprised the largest segment with $61.3 billion (or 45%), primarily due to SPAC deals and other investments in NEV. Despite disruptions and challenges stemming from the COVID-19 pandemic, investments in NEV were a central theme in 2021 across all segments. We expect these trends to drive further M&A activity in 2022 — from manufacturers (including last-mile commercial vehicles) to battery producers and other players in the EV ecosystem.
M&A recovered in 2021 and exceeded expectations as investments in new technology accelerated. We expect deal activity in 2022 to continue to expand as we experience greater access to emerging sources of capital (notably SPACs), investment in NEV and technology across all automotive subsectors. Traditional trends in supplier and retail consolidation will likely continue, yet likely with a focus on investments in technologies centering on the future of driving and new ways of engaging with customers whose buying habits have changed from traditional sources.
We also expect M&A to be both a catalyst and opportunity for organizations to right-size operations to meet new market demands and strengthen supply chains in a post-pandemic world. We’re already seeing some vehicle manufacturers enter partnerships to combat shortages of key production inputs — mainly semiconductors — and expect others to follow suit as these challenges persist well into 2022. While we remain bullish, investors will need to be cognizant of navigating ever complicated geo-political uncertainties and regulators that are beginning to focus on net-zero emission policies.
“New ways of living, new technologies, and new capital are injecting new life into automotive M&A activity. We expect these trends to continue in 2022 as automakers cement their EV plays and as SPAC dry powder chases growth in auto-tech assets.”
Industrial Manufacturing Deals Leader, PwC US
Industrial Products Deals Leader, PwC US