Automotive mergers and acquisitions (M&A) continued to decline for the second straight year to 465 total deals in 2013, PwC reported in its report Driving Value: 2013 Automotive M&A Insights.

Though at a much slower pace compared to 2012, the industry experienced overall automotive M&A deal volume down 5% to 465 transactions in 2013, compared to the significant drop of 18% experienced in 2012, when volume declined from the 594 deals transacted in 2011 to 490 deals, PwC said.

Total disclosed deal value in the sector was about US$22bn in 2013, a decline of 28% compared to the total disclosed deal value of approximately $30bn in 2012.

"The slow activity in Europe has been attributed to much of the decrease in automotive M&A activity. After several years of decline resulting from the financial crisis, Europe has started to show signs of growth as well as improved consumer and business confidence," PwC said.

"Global automotive M&A has experienced a similar decline in activity to that of cross-sector M&A, primarily driven by macro-economic trends," said Paul Elie, PwC's US automotive transaction services head.

"The slowing growth in developing markets, most notably China and Brazil, coupled with uncertainty around the European recovery, has caused market participants over the last couple years to think twice before investing in these markets.

"That said, the performance of the sector over the past five years has been strong. Automotive companies with strong balance sheets will continue to look for strategic investments that provide them with the opportunity to improve or expand their technological, customer or geographic presence."

PwC expects an increase in M&A activity after signs of a marked recovery in Europe in 2013. North America and the developing Asia-Pacific regions are also expected to continue to expand.

Longer-term, it expects the auto industry to add 25m units of production between 2013 and 2020, for a compounded annual growth rate of 3.9%.

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Automotive Deals Drop Five Percent to 465 Total Transactions in 2013, According to PwC


M&A Activity Likely To Be Driven by Emerging Markets and Next-Gen Technologies on the Horizon


Automotive Deals Drop Five Percent to 465 Total Transactions in 2013, According to PwC


M&A Activity Likely To Be Driven by Emerging Markets and Next-Gen Technologies on the HorizonDETROIT, April 29, 2014 /PRNewswire/ -- Automotive mergers and acquisitions (M&A) activity continued to decline for the second straight year to 465 total deals in 2013, PwC reports in Driving Value: 2013Automotive M&A Insights. Though at a much slower pace compared to 2012, the industry experienced overall automotive M&A deal volume, down five percent to 465 total transactions in 2013, compared to the significant drop of 18 percent experienced in 2012, when volume declined from the 594 deals transacted in 2011 to 490 deals.  In addition, the total aggregate disclosed deal value in the sector was approximately $22 billion in 2013, a decline of 28 percent compared to the total disclosed deal value of approximately $30 billion in 2012.


The slow activity in Europe has been attributed to much of the decrease in automotive M&A activity.  After several years of decline resulting from the financial crisis, Europe has started to show signs of growth as well as improved consumer and business confidence.


"Global automotive M&A has experienced a similar decline in activity to that of cross-sector M&A, primarily driven by macro-economic trends," explained Paul Elie, PwC's U.S. automotive transaction services leader. "The slowing growth in developing markets, most notably China and Brazil, coupled with uncertainty around the European recovery, has caused market participants over the last couple years to think twice before investing in these markets. That said, the performance of the sector over the past five years has been strong. Automotive companies with strong balance sheets will continue to look for strategic investments that provide them with the opportunity to improve or expand their technological, customer or geographic presence."


However, PwC anticipates a positive outlook for an increase in M&A activity with 2013 having demonstrated signs of a marked recovery in Europe. Also, North America and the developing Asia-Pacific regions are expected to continue to expand.  Longer-term, PwC's Autofacts expects the industry to add 25 million units of production between 2013 and 2020, for a compounded annual growth rate of 3.9 percent.


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The PwC report key findings:


Automotive vehicle manufacturers, suppliers and others



   --  Vehicle manufacturers and components suppliers experienced steep drops

       in deal volume (28 percent and 14 percent, respectively) compared to

       2012, while the 'others' category saw deal volume increase by 23

       percent.

   --  Deal value soared to its second highest year, hitting $12.1 billion.

Financial and trade buyers



   --  Financial buyers' activity in 2013 was flat compared to 2012, while

       trade buyers' deal volume continued to fall from the highs experienced

       in 2011.

   --  Financial buyers' deal volume of $9.2 billion represented a 119 percent

       increase from 2012.

   --  Trade buyers refocused their activity on Europe. Contrary to overall

       trends, financial buyers' activity within Asia stayed consistent with

       2012, but their activity within the U.S. slowed, while trade buyers were

       more focused on U.S. and Europe in 2013, particularly in the 'others'

       category.

Regional snapshot



   --  Europe was the most active region in automotive M&A, having transacted

       165 local and 22 cross-border deals. Nevertheless, disclosed deal value

       in the region experienced a significant drop; notably, net investments

       in Europe were only $511 thousand in 2013 compared to $1.3 million in

       2012.

   --  All the North American markets saw strong results in 2013, with

       light-vehicle sales reaching 15.5 million units and with the U.S.

       recording increases in sales of over one million units for the fourth

       straight year. In 2013, for the first time since 2002, North American

       assembly cleared 16 million units.

   --  Asia transacted the largest volume and value of outbound deals in 2013,

       with approximately 58 percent being  European assets. Three of the four

       megadeals completed in 2013 were transacted locally in Asia,

       representing part of the 90 local deals with an aggregate deal value of

       $8.01 billion.

"Automotive executives need to build their growth strategies around the global megatrends," continued Elie. "From the growth of the E7 to new technologies on the horizon, those automotive companies that exploit the opportunities presented by the megatrends will be the leading automotive companies a decade from now."


Looking ahead, PwC's anticipates a positive outlook for automotive M&A activity. Key factors predicted to spark automotive M&A growth are:



   --  Strategic approach to mitigating the risk of developing megatrends

   --  High levels of liquidity on corporate balance sheets

   --  Strategic initiatives to expand market share and grow customer,

       technological and product portfolios

   --  Reemergence of Europe from economic collapse

Original source: PwC