Automotive mergers and acquisitions up 29%, on pace for a record year

Deal value of mergers and acquisitions in the automotive industry around the world increased 29% to US$40 billion during the first half of 2018, according to data from PricewaterhouseCoopers (PwC). 

The average disclosed deal size increased 21% to US$280 million when compared to the first half of 2017. Although volume is down, with half the year left, 2018 deal value has reached 84% of the full year 2017 deal value of US$47.9 billion.

The increase in value and average deal size is primarily driven by three megadeals in 2018 compared to one in 2017. All three megadeals were by Parts and Component Manufacturers accounting for US$22 billion of deal value, or 54% of all disclosed deal value in 2018.

Concerning the second quarter, there were 192 deals, 15% lower than Q2 2017, and 10% lower on a year-to-date basis. However, the average disclosed deal value for Q2 2018 of US$195 million is consistent with the three-year historical average. A US$5.4 billion acquisition was the largest transaction in the sector this quarter.

Likewise, all six megadeals announced since 2015 were transacted by Parts & Component Manufacturers (Suppliers). Over the past several years, suppliers have generated strong cash flows on increased vehicle volumes, resulting in higher cash balances and lower debt levels, providing significant capacity to do deals.

Asia and Oceania acquirers spent US$18.7 billion in 2018, or 47% of disclosed deal value as the industry in that part of the world grows faster than the overall industry. The majority of deal activity continues to be local deals.

Tenneco’s acquisition of Federal-Mogul Holdings for US$5.4 billion was the largest deal this quarter. In April, Tenneco, a leading designer, manufacturer and distributor of ride performance and clear air products and technology solutions for diversified markets, agreed to buy Federal-Mogul, a global supplier to original equipment manufacturers and the aftermarket. 

Tenneco also announced its intention to separate the combined businesses into two independent, publicly traded companies. 

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