automotive m&a insights: mid year review 2013

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  1. 1. Automotive M&A Insights: Mid-year 2013 September 2013 www.pwc.com/auto
  2. 2. Welcome We are pleased to present Automotive M&A Insights: Mid-Year 2013, PwCs quarterly review of mergers and acquisition (M&A) activity and key trends impacting the global automotive industry.1 In this edition, we look at: The status of global automotive deal activity among vehicle manufacturers, suppliers, nanciers, and other related sectors (including; retail, aftermarket, rental/leasing, wholesale, etc.) Key trends that impacted the deal market in the rst half of 2013 Transaction activity by sector and region Our perspective on the road ahead This latest edition of Automotive M&A Insights: Mid-Year 2013 is meant to serve only as a preface to the insights and observations that we can provide to drive successful transactions. M&A leaders in the automotive and nancial sectors frequently turn to us for advice on potential transactions and the strategies underpinning those deals. Your feedback is important to us, and we welcome the opportunity to provide you with a deeper look into any of these topics that may be of benet to your organization. 1 Data sourced from Thomson Reuters as well as analysis performed by PwCs Autofacts Paul G. Elie U.S. Automotive Transaction Services Leader +1 (313) 394 3517 paul.g.elie@us.pwc.com
  3. 3. 2013 Automotive insights 1 The big picture: Globally, cross-sector M&A volume dropped by 14% compared to the rst half of 2012 marking the slowest rst-half activity since 2003. Consistent with cross-sector activity, automotive deal volume has also slowed; however, deal value has risen by 24% and the rst half of 2013 saw the average deal size accelerate, generating a 72% increase over the rst half of 2012. A snapshot of industry sectors and regions: In the rst half of 2013, Vehicle Manufacturers suffered a steep drop in both deal value (75%) and volume (29%) compared to the rst half of 2012. In contrast, deal value in the Component sector suppliers and businesses in the Others category, which includes: retail, aftermarket, rental/ leasing and wholesale, etc., soared by a remarkable 84% and 121% respectively. With regard to Assembly volumes, moderate growth in some regions was offset by the woes in Europe, but European recovery is expected to begin in early 2014. While North America and Developing Asia Pacic have both fueled Assembly growth (+793K and +689K units, respectively), we expect to see ongoing declines in the Developed Asia Pacic region. We attribute this primarily to ongoing localization of vehicle production abroad by foreign and European OEMs, coupled with the lingering economic pain that is thwarting growth in Europe. Globally, PwCs Autofacts team expects Light Vehicle Assembly to reach 81 million units in 2013 a 2.3% year-over-year increase. Executive summary Whos buying? During the rst half of 2013, both nancial and trade buyers continued to put the brakes on deal volume. That being said, nancial buyers made signicant investments in the automotive sector, with $6.8 billion in deals closing during that periodthe highest share of deal value injected by nancial buyers in the last ve years. They are now focusing their efforts on the Components and Others categories, targeting candidates in Europe rather than in Asia. Trade buyers are following suit. Their share of deals in Europe has reached new heights, while their demand for Asian assets has plunged to depths not seen in ve years. Trade buyers investments in the Others category has driven four consecutive years of growth in that sectorclose to pre-recessionary share levels. The road ahead: Overall, given the underlying optimistic view of global automotive sales, PwC continues to maintain a positive outlook for Automotive M&A. To meet this growing demand, Assembly is expected to add nearly 24 million units between now and 2019a compounded growth rate of 4.35%. Long-term, M&A activity will play an important role in the continued efforts to develop and integrate new technology into vehicles to improve safety, fuel efciency and connectivity. We anticipate a steady rollout of innovative new technologies over the next several years. With that being said, the timing and degree of growth in the global automotive M&A markets will of course depend on the future state of the economic climate around the world.
  4. 4. 2 PwC Cross-sector M&A Global cross-sector M&A deal volume and value H1 2001H1 2013 Continuing the trend of the prior year, global cross-sector M&A activity in the rst half (H1) of 2013 declined by 14% compared to the rst half of 2012. While this marks the slowest rst half of deal activity since the rst half of 2003, deal value has increased slightly to $980 billion from $930 billion in the rst half of 2012. Disclosed deal value 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 H1 2013 H1 2012 H1 2011 H1 2010 H1 2009 H1 2008 H1 2007 H1 2006 H1 2005 H1 2004 H1 2003 H1 2002 H1 2001 Deal volume (R-Axis) Discloseddealvalue($trillion) Dealvolume(thousands) 0 2 4 6 8 10 12 14 16 18 20 15.1 18.7 16.0 16.0 15.0 12.9 19.0 16.5 14.3 13.4 11.411.1 13.9 $1.25 $0.61 $0.59 $0.68 $0.86 $1.38 $1.89 $1.45 $0.91$0.81 $1.30 $0.93 $0.98 Source: Thomson Reuters and other publicly available sources.
  5. 5. 2013 Automotive insights 3 Automotive M&A Consistent with cross-sector activity, automotive deal activity has continued to slow-down with declines of 16% and 13% over the last two comparable periods (H1 2013 vs H1 2012 and H1 2012 vs H1 2011). This represents a total of 222 M&A deals compared to 264 deals in the rst half of 2012. In terms of deal value, however, the automotive sector experienced an uptick in the rst half of 2013 ($13.1B) compared to the rst of 2012 ($10.6B), registering a 24% increase. From a global Assembly perspective, the industry started off slow in 2013, as moderate growth in some regions has been offset by the European slump, which is expected to start recovering in early 2014. While regions such as Developing Asia-Pacic (+689k) and North America (+793k) have contributed heavily, Developed Asia-Pacic (-304k) is expected to see continued declines as Assembly is localized abroad, and woes in the European Union (EU) (-501k) linger. Autofacts is forecasting Light Vehicle Assembly to reach 81 million units in 2013, a 2.3% year-over-year increase. PwC continues to maintain a positive outlook for automotive M&A. This is primarily driven by the underlying optimistic view of global automotive sales. To meet this level of demand, assembly is expected to add nearly 24 million units between 2013 and 2019 for a compounded annual growth rate (CAGR) of 4.35%. Long-term, M&A activity will play an important role in the continued efforts to develop and integrate new technology into vehicles to improve safety, fuel efciency and connectivity. Autofacts is anticipating a steady rollout of some of these new technologies over the next several years, and strategic collaboration and integration will likely drive further M&A activity. However, the full impact and timing of the recovery of the automotive M&A markets will depend on the economic climate, and could be delayed by a slower than expected European recovery. Global automotive M&A deal volume and value H1 2006H1 2013 Sources: Thomson Reuters and other publicly available sources. Disclosed deal value UST Facilitated Investments Deal volume (R-Axis) 0 5 10 15 20 25 30 35 H1 2013H1 2012H1 2011H1 2010H1 2009H1 2008H1 2007H1 2006 Discloseddealvalue($billion) Dealvolume 0 50 100 150 200 250 300 350 333 282 257 265 303 264 $13.1$10.6$18.8$11.6$16.0$19.0 $24.2 $7.5 $20.4 222 300
  6. 6. 4 PwC Increased average deal size Average disclosed deal size during the rst half of 2013 increased to $171 million, representing a 72% increase over the rst half of 2012. The average deal size is more in line with pre-recessionary investments levels. Small and mid-size deals continue to dominate the global automotive M&A landscape. Only two megadeals (>$1 billion) were transacted during the rst half of 2013, which is consistent with the average seen in the last three comparative periods. Global automotive M&A deals by disclosed value H1 2008H1 2013 Sources: Thomson Reuters and other publicly available sources. 100 million1 billion >1 billion 0 20 40 60 80 100 120 H1 2013 H1 2012 H1 2011 H1 2010 H1 2009 H1 2008 89 18 $146 $396 $127 $203 $99 $171 3 67 7 6 73 16 2 70 19 4 83 24 57 18 2 0 50 100 150 200 250 300 350 400 450 Dealvolumeofdiscloseddealvalue Averagediscloseddealvalue($billion)

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