Automotive Suppliers Mergers & Aquisitions Growth...

For the first time since 2011, automotive supplier Mergers & Acquisition (M&A) activity is expected to increase; based on data for the first six-months of 2014. PwC estimates about 211 deals for the year, which will be a 13% increase over 2013, according to this latest study by PWC Consolidation in the Global Automotive Supply Industry 2015.

“Consolidation in the Global Automotive Supply industry”, in its seventh consecutive year, is based on financial, operational, and strategic data collected by a global team of automotive experts representing all of the major automotive markets. PWC looked at 808 suppliers from key regions, such as Brazil, China, Europe, India, Japan, North America, and South Korea.

PwC’s study identifies large global North American and European suppliers as the biggest consolidators in 2014. While the North American suppliers were among the largest consolidators already in the last three years, the re-emergence of the European suppliers as consolidators is a recent development. Also noteworthy is the increased involvement of Private Equity in the resurgence of automotive supplier consolidation with almost a quarter of all deals in 2014 involving Private Equity firms.

The study by PwC’s consulting arm Strategy& and discussed in Supplier Management, estimates that Mergers and Aquisition (M&A) activity in 2015 is likely to exceed a global transaction value of $48 billion  This compares to the previous high of $35 billion worth of transactions closed in 2007. The study includes 819 suppliers from regions such as Brazil, China, Europe, India, Japan, North America, South Korea and south-east Asia.

PWC list of top auto supplier consolidators included 23 companies: 12 were North American, six European, two Japanese, two South Korean and one Chinese. Nine of the top 10 consolidators were North American suppliers, the study found. The Consolidation in the Global Automotive Supply Industry 2015 study found 42 per cent of all deals in the past 12 months were related to the power train and chassis systems of the automobile.

The report said the largest auto supplier consolidators carried out an average of eight deals over the past five years, and outperformed the rest of their peer group in earnings growth. Half the top consolidators grew EBITDA margins by over 50 per cent. The most acquisitive company performed 39 deals and grew EBITDA by $1.3 billion (£850 million) and increased margins by 35 per cent.

Dietmar Ostermann, PwC Strategy&’s global automotive advisory leader and one of the authors of the study, said: “Auto supplier consolidation is fuelled by a number of factors, including the long-term growth in global vehicle production, five years of double-digit growth for many global suppliers, technological developments related to light weighting, power train enhancements, ‘connected car’ and autonomous driving, as well as a strong uptick in private equity activity.

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