Automotive M&A in 2020 encountered both great lows and great highs. The COVID-19 pandemic dampened deal activity in Q2 to a degree not seen since the Great Recession. Activity, however, swiftly rebounded in Q3 with a steep recovery many didn’t expect. The bounceback was largely led by the emergence of new capital in the form of special purpose acquisition companies (“SPAC”) investing in CASE technologies. As a result, deal value and volume declined 32% and 18%, respectively, in 2020 compared to 2019. Excluding megadeals, deal value over the two periods lifted by 16%, with 2019 benefitting from the announced FCA/PSA merger worth $22B. The third quarter proved vital to the recovery with $23B of deal value reported. Q4 activity, however, has regressed in line with Q2, as fears of another COVID wave take hold.
PwC's Deals Sector Leader John Potter discusses the trends driving deals and outlook for 2021.
PwC's Deals Sector Leader John Potter discusses the trends driving deals and outlook for 2021. Explore national deals trends
The automotive sector faces a challenging year ahead as COVID-19 will likely continue to produce headwinds for dealmakers to navigate. While we expect a recovery of deal value and volumes from 2020, volatility will likely nevertheless take hold in 2021, even as we emerge from the pandemic. Investments in CASE technologies may continue to drive M&A activity; however, distressed M&A and a fresh wave of supplier consolidation could also likely play a role in the rebound. Alliances and joint ventures, a trend in 2019 -- yet one which slowed in 2020 -- could offer continued purpose for CASE investments and new uses to support those companies still challenged by the effects of the pandemic.
“Investments in CASE technologies drove Automotive M&A in 2020, primarily through SPAC mergers contributing to a resurgence of deals in Q3-20. The start of 2021 will certainly have COVID and economic headwinds, but M&A through SPAC mergers is a trend we anticipate continuing to see drive deal activity in 2021 and beyond.”
Industrial Products Deals Leader, PwC US
Automotive Leader, PwC US