The value of mergers and acquisitions (M&A) of suppliers to the automotive industry is expected to hit record levels this year.
A study by PwC’s consulting arm Strategy& estimates that M&A activity in 2015 is likely to exceed a global transaction value of $48 billion (£32 billion). This compares to the previous high of $35 billion (£23 billion) worth of transactions closed in 2007.
Strategy& said after excluding large deals worth more than $500 million (£328 million), the average number of deals, around 200, and the average deal size, $100 million (£66 million), would remain approximately the same.
The Consolidation in the Global Automotive Supply Industry 2015 study found 42 per cent of all deals in the past 12 months were related to the power train and chassis systems of the automobile.
Strategy&’s list of top auto supplier consolidators included 23 companies: 12 were North American, six European, two Japanese, two South Korean and one Chinese. Nine of the top 10 consolidators were North American suppliers, the study found.
The report said the largest auto supplier consolidators carried out an average of eight deals over the past five years, and outperformed the rest of their peer group in earnings growth. Half the top consolidators grew EBITDA margins by over 50 per cent. The most acquisitive company performed 39 deals and grew EBITDA by $1.3 billion (£850 million) and increased margins by 35 per cent.
Dietmar Ostermann, PwC Strategy&’s global automotive advisory leader and one of the authors of the study, said: “Auto supplier consolidation is fuelled by a number of factors, including the long-term growth in global vehicle production, five years of double-digit growth for many global suppliers, technological developments related to light weighting, power train enhancements, ‘connected car’ and autonomous driving, as well as a strong uptick in private equity activity.”
The study includes 819 suppliers from regions such as Brazil, China, Europe, India, Japan, North America, South Korea and south-east Asia.