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August 11, 2016

Supplier M&A deals revving up

The value of automotive supplier consolidation deals continues to soar according to Bloomberg data.

The value of automotive supplier consolidation deals continues to soar according to Bloomberg data.

Bloomberg said that its data compilation showed the total value of automotive-supplier deals in 2015 and 2016 was US$74.4bn, with each of those years far exceeding the US$17.7bn annual average in the previous ten years. It also said the number of transactions valued at US$500m or over jumped to 18 last year, triple the level of the previous decade. Furthermore, Bloomberg said there have been eleven such deals so far this year.

Many industry analysts say that the surge in M&A deals reflects a number of technology drivers that could reshape the industry, including the move towards autonomous cars and greater vehicle connectivity as well as tighter standards for CO2. Parts suppliers positioned in high-growth technology areas are likely to experience the highest profitability in the long-term.

Also, share prices for suppliers have come down as the US vehicle market tops out and a number of uncertainties cloud the outlook for the global auto market. The increased interest from Silicon Valley firms in the transportation space is also adding to a sense of urgency from investors.

Last year ZF acquired TRW in a US$13.5bn deal to create a new mega-supplier – the biggest M&A deal in the auto supply sector. The deal brought the two technology groups together under the same company roof to help build presence in the growing DAS/self-driving vehicles sector.

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