M&A activity dropped slightly YoY in 2018, due to an especially weak Q1, however deal making continues to be an important repositioning tool – to support global growth, improve product & technology portfolios (e.g. e-mobility solutions), and to consolidate what remains a widely fragmented market in certain segments (e.g. Interiors & Exteriors). Asian buyers from both emerging and developed markets have been an important source of deal-demand, acquiring to expand their global operations and to improve their product & technology offerings. More than ever, suppliers need to focus on what they do best, which is driving many to streamline operations and focus on their core business.
Key insights from our research include:
- A slight decline in M&A activity among Automotive Suppliers in 2018 (-11% compared to 2017). Despite some large deals in the billions of Euros, buyers were focused mostly on small and mid-market companies: the average deal-value was €378m.
- Most buy-side demand is for businesses that offer exclusive know-how, or that are plugged into ‘the future of mobility’.
- Deals are also being used to streamline and optimize product & technology portfolios, and to access new customers and geographies.
- As in previous years, Europe remains the most popular region for acquirers, with around 39% of all reported M&A transactions, followed by Asia (30%) and North America (27%).
- Valuations for listed suppliers continue to vary widely, depending on the market segment. Electronics know-how is at the top of buyers’ shopping lists.
- The average valuation for the sector was 4.7x EBITDA at the end of 2018, which is a decline of 29% compared to 2017 (6.6x EBITDA).
After several years of rising markets and steady growth, suppliers are being required to face the significant challenges of technological transformation. Companies of all sizes technology need to adjust their business profiles – either by acquiring to expand specific product & offerings or by streamlining or divesting their traditional business segments.