Global automotive deals insights: Q3 2019

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Executive summary

Deal value in Q3 2019 struggled to reach $7 billion, down 27% from Q2 2019 and bringing YTD 2019 down almost 50% from YTD 2018. Volume in the YTD 2019 period has remained steady, dropping only 3% quarter over quarter. A lack of megadeals in 2019, coupled with a slowdown of deals over $1 billion, drove down average deal size in YTD 2019 from $235.1 million in YTD 2018 to $160.9 million. Following an active 2018, deal makers are letting the dust settle and focusing on the development of their previous bets. Nonetheless, with strong fundamentals both strategic and financial investors remain in a position to buy, providing reason to believe M&A could bounce back should more attractive assets become available.

automotive-deal-summary

“Year-to-date Automotive M&A activity clearly indicates that technology is front of mind to deal makers. However, sector fundamentals, including slowing growth, continued trade tensions and concerns over an economic downturn are causing deal makers to think twice about their auto investments.”

Paul Elie, Industrial Products Deals Leader

Trends and highlights

  • In Q3 2019, total deal value declined by 27% to $6.8 billion over Q2 2019. Deal value in Q3 2019 has reached a low point over the last eight quarters. For YTD 2019, deal value has declined by 49% to $31.7 billion over YTD 2018.
  • In Q3 2019, total deal volume dropped only 3% to 197 deals over Q2 2019 and declined by 24% to 604 deals in YTD 2019 over YTD 2018.
  • Average deal size declined by 24% to $97.6 million in Q3 2019 over Q2 2019. When compared to YTD 2018, average deal size has declined by 32% to $160.9 million in YTD 2019.
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Highlights of deal activity

auto-deals-activity-overview
auto-deals-activity-chart

Key announced transactions (YTD 2019)

Announced

Target name

Target nation

Acquirer name

Acquirer nation

Status

Deal value*

Category

03/28/19

WABCO Holdings Inc.

United States

ZF Friedrichshafen AG

Germany

Pending

7,432

Parts and Components Manufacturing

03/26/19

Careem Networks FZ LLC

United Arab Emirates

Uber Technologies Inc.

United States

Pending

3,100

Maintenance, Repair and Other Services

06/20/19

BCA Marketplace PLC

United Kingdom

BBD Bidco Ltd.

United Kingdom

Pending

2,409

Automotive Retail and Wholesale

09/23/19

Hyundai Motor Co.

South Korea

Aptiv PLC

Ireland Republic

Pending

1,600

Vehicle Manufacturing

09/10/19

Rivian Automotive Inc.

United States

Investor Group

United States

Pending

1,550

Vehicle Manufacturing

05/29/19

Zhongce Rubber Group Co. Ltd.

China

Investor Group

China

Pending

1,021

Parts and Components Manufacturing

02/11/19

Nuro Inc.

United States

SoftBank Vision Fund LP

United Kingdom

Pending

940

Vehicle Manufacturing

01/15/19

National Electric Vehicle Sweden AB

Sweden

Solution King Investments Ltd.

British Virgin Islands

Completed

930

Vehicle Manufacturing

04/16/19

OMRON Automotive Electronics Co. Ltd.

Japan

Nidec Corp.

Japan

Pending

893

Parts and Components Manufacturing

06/19/19

Chassis Brakes International BV

Netherlands

Hitachi Automotive Systems Ltd.

Japan

Pending

772

Parts and Components Manufacturing

Source: Thomson Reuters and other publicly available sources. *In Million USD


Automotive deals outlook

The second half of 2019 continued its tumultuous journey showing further signs of a slowdown with decreasing deal activity and depressed value. Investors are taking a more cautious approach and a harder look at available assets as the industry faces a paradigm shift where technology is at the forefront of the product and customer experience.

Deal makers that have made their bets in the varying array of auto-tech are now focused on seeing those bets pay off as they integrate these endeavors into their organizations and track their technological development. Many, seeing the rising cost to develop and the alternatives brought to market, are partnering with others to share the cost burden and strategically align market players to proven technologies. We’ve seen this in a few different ways so far in 2019, and we expect further alliances to help fuel the next round of investment and development, with others continuing to make technological bets to strengthen their product portfolios and capabilities.

But technology will not be the only driver of M&A with the sector facing leaner times ahead. The good times of the past few years have hidden many missteps, and as markets adjust to slowing sales and growth, losers who struggle or are lacking in Fit for Growth strategies will emerge. Consolidation and scale will provide known benefits, however, will also serve to drive deeper cross-border partnerships as regulatory headwinds provide a back drop for deal activity. Whether to combat or set emission targets, provide manufacturing and supply-chain agility to combat global and regional political trade disputes, or protect against rising labor costs, M&A can serve as a line of defense in these challenging times.

Investors continue to face changing times in the auto sector. Strong corporate balance sheets and record levels of dry powder provide a sense of confidence that deal makers have the necessary tools to support M&A activity amid mixed macro-economic indicators. With the peak M&A activity of 2018, sellers of non-core assets should emerge, and investors will need to be disciplined to their strategy and valuations as 2019 ends and attention shifts to 2020.

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 October 1, 2016 and September 30, 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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