The total value of deals in the global automotive sector rose by 85 % in 2002 to $US35.1bn from $19bn in 2001. Deal numbers also surged in 2002, rising to 621 from 462 in 2001 – a 35% rise and representing the highest level of deal activity recorded for the industry.
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According to PricewaterhouseCoopers latest analysis, the increase in the number of “mega deals” was the main driver for the increase in deal value in 2002, but valuation multiples remained depressed as stock market values slumped.
Philip Wylie, corporate finance automotive team leader at PwC, said: “The increase in deal activity reflects a second phase of consolidation in the automotive sector. While billion dollar deals are not as common as in the late 1990s, the mid-market is awash with opportunities.
“Our international automotive advisory teams are currently very busy and we believe 2003 could see record numbers of transactions completed, although each transaction will require real commitment to reach the finishing line.”
The value of deals within the vehicle manufacturers (VMs) segment totalled $10.0bn with 69 deals completed in 2002. This marked a significant rise from a deal value of $2.2bn and 57 completed deals in 2001. The most noticeable trend in this arena is the increasing number of tie-ups between VMs. This trend is particularly acute in China, now seen as the “great hope” for long-term growth in vehicle sales, where 18 of the deals were centred. This trend is expected to continue in 2003 and beyond.
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By GlobalData
The Automotive Retail, Aftermarket, Rental/Leasing and Wholesale sectors saw the number of deals reach an all time high in 2002, with 278 transactions completed compared to 184 in 2001. Deal value totalled $8.8bn in 2002; compared to a $5.1bn deal value in 2001.The retail sector was the most active during this period, with 127 deals, up from 68 deals in 2001.
The sector witnessed the start of consolidation amongst retailers in Europe as the effect of the EU’s revision of Block Exemption rules took hold. Larger retail groups and new entrants, such as supermarkets and financial houses, now have the opportunity to build national retail operations. Looking forward to 2003 and beyond, further consolidation is expected in the retail sector as larger retailers and new entrants look to gain critical mass and take advantage of the opportunity to sell cross-border from 2005. The Block Exemption review is also expected to lead to further consolidation in the fragmented “fast-fit” and “slow-fit” aftermarket segments, as the new EU rules force vehicle manufacturers to allow the separation of vehicle sales and repair activities.
M&A activity in the Component Suppliers sector also witnessed a 24% increase in 2002 with deal numbers up to 274, from 221 in 2001. Average deal value declined again in 2002, impacted by a decline in both valuation multiples and the scale of the average company acquired. This reflects the shift in emphasis from large Tier 1 deals, prevalent in the late 1990s, to more aggressive consolidation amongst the Tier 2 supplier community, as well as the disposal of non-core assets from the Tiers 1s. Average disclosed deal value has more than halved since 1999, from $294bn to $125bn in 2002.
