Mid-Market Automotive Sector M&A Saw Healthy Growth in 2015

With 591 deals in 2015, the industry saw its highest volume of deals transacted since 2011 and 9% more than in 2014, according to an analysis by PwC. And the outlook is strong for 2016 as well.

Deal value and size increased by even more. The average automotive deal size increased by 81% to $388 million from $214 million, the consulting firm said, while the overall deal value in 2015 was up 60% to $62.1 billion, the highest mark in 16 years.

Much of the deal value and deal size increases, PwC said, can be attributed to the year’s record-setting 12 megadeals, with a total aggregated disclosed value of $46.3 billion. But that meant nearly $20 billion in deals was conducted by smaller companies, including many of the mid-market concerns that form the backbone of the Tiers 2, 3 and 4 in the automotive supply chain.

In fact, PwC said, local deals dominated M&A activity across all regions with 83% of all deal volume consisting of local deals, within one continent. After Europe, North America ranked as the No. 2 region in local deals, with 136.

And the largest accelerator of M&A activity during 2015, PwC reported, was component suppliers, a sector that is dominated by mid-market companies. Deal value there nearly doubled to $32.9 billion compared with 2014, indicating that many mid-market CEOs in the auto-supply business had M&A on their minds.

But some experts question if the auto industry can continue to break sales records, meaning that it’s even more critical for companies to respond to consumer demands for new technology and features—which, in turn, places more pressure on suppliers.

Other factors that will continue to influence automotive CEOs as they consider the need or desirability of M&A activity, PwC said, include responsiveness to opportunities in new geographic blocs, production-plan flexibility as lower gasoline prices affect vehicle sales segmentation, and the  need for investments in electronics and alternative forms of mobility such as ride-sharing.