Global automotive deals insights: Year-end 2019

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Executive summary

2019 capped off the decade with a bang as deal value and activity recovered from a slow start to the year. Boosted by eight deals in excess of $1 billion, primarily related to the Fiat Chrysler and Peugeot megadeal contributing ~40% of total deal value, global deal value rose to $77.5 billion on 867 deals. Even with the strong finish to 2019, this is below 2018’s historic year but 63% higher than FY 2016 and FY 2017’s average total deal value of $47.6 billion. Deal activity was sporadic to start the year as volumes averaged 208 deals per quarter through Q3 2019, but jumped to 244 deals in Q4 2019—indicating there’s still plenty of appetite for M&A. The quest for technology, talent, and cost sharing solutions should provide continued activity in 2020 and moving forward into the new decade.

automotive-deal-summary

"Technology and supplier consolidation drove M&A activity in the latter half of the decade, and will continue to push activity as we move forward in the 2020’s. The start of this decade will also see a shift in deals as vehicle manufacturers and suppliers team up to share costs and push their technological bets into the market.”

Paul Elie, Industrial Products Deals Leader

High level trends and highlights of 2019

Highlights

  • Total deal value in 2019 declined 19% to $77.5 billion compared to 2018. However, deal value in Q4 2019 was the highest this decade as the quarter saw eight deals in excess of $1 billion, including Fiat Chrysler and Peugeot’s announced megamerger for $30.1 billion.

  • In 2019, total deal volume dropped 18% to 867 deals compared to 2018. However, deal volume recovered in Q4 2019 and increased by 17% to 244 deals when compared with 208 deals in Q3 2019. 

  • Average deal size in 2019 remained flat at ~$269 million when compared to 2018. Excluding megadeals, average deal value in 2019 decreased 10% to $139.7 million from $155.5 million.

Deals by disclosed value and average deal size

The average deal size in 2019 remained flat at ~$269 million when compared to 2018. The megadeal between Fiat Chrysler Automobiles NV and Peugeot SA buoyed deal value and kept the average deal size for 2019 on par with that of 2018. In Q4 2019, the average deal size grew 5.4x to $513.6 million from $95.2 million in Q3 2019 as a result of the FCA and PSA megadeal.

Excluding megadeals, average deal value in 2019 decreased by 10% to $139.7 million from $155.5 million in 2018. A sign of the cautiousness deal makers took this year as they digested 2018’s record activity, which may have limited the pool of attractive assets this year.

Financial vs. strategic investors

Strategic investors contributed 81% and 76% share of total deal value and volume, respectively, in 2019 (with similar percentage trends experienced in Q4 2019). Meanwhile, financial buyers remained active in the sector consistent with their historical average but were more reserved in executing large deals as they represent only 19% of total deal value in 2019 compared to 44% in 2018.

Regional analysis

The UK and Eurozone led deal value in 2019 among the regions by contributing 62% and 50% share in both the acquirer and target regions, respectively, driven by this year’s megadeals. In terms of deal volume, Asia and Oceania was the leader with 40% and 39% share in both the acquirer and target regions, respectively, during 2019. This year also saw a 21% drop in cross-border activity—a sign of the impact of geopolitical tensions that have arisen over the last few years.


Highlights of deal activity


Automotive deals outlook

As we reflect on 2019 as well as the previous decade, the automotive sector has reinvented itself from the start of the decade and perhaps come full circle. Coming on the heels of the Great Recession, the decade brought unprecedented hardships to many as they navigated an industry recovering from bankruptcies and diminished sales. The middle of the decade created momentum to the recovery, and the latter half accelerated growth and excitement as new technologies and market entrants brought radical changes to how consumers view mobility solutions. But now we face some new uncertainties as lower vehicle sales projections and trade tensions create roadblocks to maneuver.

There is no doubt that as we enter this next decade, automotive companies are in much better financial shape than when they entered the last one. Corporate balance sheets and access to capital remain strong, and the appetite for deals continues to grow as competitive pressures weigh on companies to accelerate their technological advancements. On that premise we expect M&A activity to be driven by the need to share costs, talent, and capabilities to bring auto-tech investments to market, as well as the need to create agility to counteract the speed of technological innovation and regulatory pressures. Those same regulatory pressures helped drive the increase in alliances and joint ventures in 2019, as tariffs and emissions standards squeezed margins and R&D budgets, forcing vehicles manufacturers and suppliers to team up with competitors to share the burden. 

While we’re optimistic about the industry’s outlook for 2020 and beyond, as there could be a decoupling of the M&A fundamentals from market fundamentals in the event of increased recessionary fears. However, this year’s election cycle can bring uncertainty as politicians take aim at industries playing a role in today’s global issues, and as we’ve seen recently, the auto industry is an easy target. Coupled with sales projections that anticipate a weaker start to the decade, deal makers may look to take a back seat as Brexit and the US presidential election play out only to hit the gas once the dust settles.

About the data

The information presented in this report is an analysis of deals in the global automotive industry. Deal information was sourced from Thomson Reuters and includes deals for which targets fall into Thomson Reuters’ automotive mid-industry. Certain adjustments have been made to the information to exclude transactions which are not specific to automotive or incorporate relevant transactions that were omitted from the SIC industry codes.

This analysis includes all individual mergers, acquisitions, and divestitures for disclosed or undisclosed values, leveraged buyouts, privatizations, minority stake purchases, and acquisitions of remaining interest announced between January 1, 2017 and December 31, 2019, with a deal status of completed, partially completed, pending, pending regulatory and pending completion, and excludes all rumors and seeking buyers. Additionally, transactions that are spin-offs through distribution to existing shareholders are included.

Percentages and values are rounded to the nearest whole number which may result in minor differences when summing totals.

Contact us

Paul Elie

Industrial Products Deals Leader, PwC US

Ray Telang

Automotive Leader, PwC US

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