In the first six months of 2016, buyers closed 85 deals to acquire automotive suppliers, up from 84 deals a year earlier, according to PricewaterhouseCoopers.
But the value of supplier M&A deals in the first half totalled $10.1 billion (€8.93 billion), just more than half of the $20.0 billion spent a year earlier.
That would be the first time that the value of supplier acquisitions has declined since 2010, according to PwC. But that’s because last year’s dollar figures were inflated by a single giant deal – ZF Friedrichshafen’s $12.5 billion acquisition of TRW Automotive Holdings Corp., said Jeff Zaleski, PwC’s US automotive deals leader.
“We’re off from a record high in 2015, but the market continues to be strong,” Zaleski said. “We think we’ll have a positive M&A market in the next six months.”
Deal-making should be lively because suppliers have cash and investors are pressuring companies to dump noncore assets, Zaleski said. Europe, recovering slowly from its deep recession, should be a fertile market for M&A activity, he added.
“There is still a lot of consolidation to be done” in Europe, Zaleski said.
Fast-paced advances in self-driving cars, connectivity and fuel economy will keep the heat on suppliers to make deals, predicts Mark Wakefield, a managing director at AlixPartners.
Suppliers in these segments can develop their own technology, find a partner or buy another company. Likewise, these companies must be prepared to dump divisions that are also-rans in their segments. Standing pat is not a good option.