Automotive merger and acquisition (M&A) activity will continue to drive the changes necessary for the near-term restructuring and long-term sustainability of the industry, according to PricewaterhouseCoopers .
In its report, ‘Drive Value – Automotive M&A Insights 2009,’ PwC says the deal market will play a critical role as market participants pursue transactions with a focus on synergies, including cost savings and adding revenue to their business.
“The current deal environment is showing positive signs and presents a number of opportunities for both strategic and financial buyers who have access to financing,” said PwC US automotive transaction services leader, Paul Elie.
“Companies with stronger operating models and cash positions will likely leverage M&A to develop a competitive advantage through the consolidation of scale and expertise,” added US automotive strategy leader, Paul McCarthy.
The report details how automotive M&A deal value soared to US$121.9bn in 2009, up 286% from US$31.6bn in 2008. The increase in deal value was influenced heavily by the US Treasury investment in the vehicle manufacturing sector, which occurred in response to a near collapse of the automotive industry.
Players across the automotive value chain reacted as they sought capital infusions, shed non-core assets, renegotiated debt obligations and pursued mergers of necessity.
Despite the record high deal value in 2009, the total deal volume fell to 532 transactions, representing a 3% decline from an already weak 2008 level and its lowest point since 2004.
“As we look forward, companies are likely to increase their focus on growth and the traditional drivers of M&A — driving economies of scale, acquiring technology and expanding their geographic and customer base,” said Elie.
The report adds automotive companies seeking long-term success will drive the deal market in 2010, by developing and executing strategies for sustainable growth and value creation.