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    Driving Value: 2015 Automotive M&A Insights

    In this issue

    1 Welcome

    3 Key trends at a glance

    4 2015—Year in review

    9 Insights into regions

    11 Analyzing industry segments

    12 Who’s buying: Financial versus Trade buyers

    13 The road ahead

    15 Contact information

  • Driving value 2 2015 Automotive M&A Insights

    Welcome

    We are pleased to present Driving Value: 2015 Automotive M&A Insights, PwC’s review of mergers and acquisitions (M&A) activity and key trends impacting the global motor vehicle industry.

    In this edition, we look at:

    • The status of global deal activity amongst motor vehicle manufacturers, suppliers, financiers, and other related sectors

    • Key trends that impacted the deal market

    • Transaction activity by sector and region

    • Our perspective on the journey to the future

    This latest edition of Automotive M&A Insights 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 financial 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 trends that may be of benefit to your organization.

    Jeff Zaleski

    U.S. Automotive Deals Leader

    +1 (313) 394 3525

    jeffrey.e.zaleski@us.pwc.com

  • Driving value 3 2015 Automotive M&A Insights

    Trade buyers’ share of global automotive M&A volume INCREASED

    total aggregated

    disclosed value

    of megadeals –

    HIGHEST EVER IN

    REVIEW PERIOD

    $388 million

    Global automotive deal volume grew by

    9% closing591

    $62.1 billion in global automotive deal value

    Key trends at a glance Automotive

    HISTORICAL HIGH— Average global automotive deal size of

    HISTORICAL HIGH Predicted global automotive assembly growth 2015

    2021

    4%

    CAGR Source: PwC Analysis

    North American automotive assembly units forecast to be added between 2015 and 2021

    million units

    billion

    RECORD HIGH

    to HISTORICAL HIGH

    2.8

    $46.3

    B I L L I O N total deal value attributable to U.S. assets

    $30.1

    $32.9 billion

    megadeals

    $12.5 billion

    50% TOP 10 DEALS T A R G E T E D EUROPEAN ASSETS

    COMPONENT SUPPLIERS deal value soared to

    12 Source: Thomson Reuters and other publicly available resources. PwC Autofacts 2016 Q1 Data Release.

    Largest automotive deal since 2007 Others’ segment deal volume climbs

    40%

    75%

    deals in 2015 Up 60% from 2014

    Up 96% from 2014

    Up 81% from 2014

    ZF Friedrichshafen AG acquisition of TRW Automotive Holdings Corp

  • Driving value 4 2015 Automotive M&A Insights

    Year in review

    Overview

    Automotive M&A deal volume for 2015 was up 9 percent, further extending gains made in 2014. With 591 deals, the industry saw its highest volume of deals transacted since 2011.

    • Global market conditions across all industries are showing positive trends consistent with the automotive industry. Global cross-sector M&A deal value increased 26%, while deal volume remained mostly consistent, when compared to 2014. This increase in deal value is being driven by greater numbers of megadeals (deals greater than $1.0 billion).

    • Technology and Regulation Drives Changes in Auto —In automotive, new technologies are dramatically changing vehicles, from the advent of the ‘connected car’ and enhanced driver support to better fuel efficiency and new or improved powertrains. Entirely new industries are being created to manage these breakthroughs and develop the processes to integrate new technologies into the automotive business model. As almost 200 nations agreed to reduce carbon emissions at the end of 2015, many automakers look to alternative energy solutions, due to anticipated stronger EPA regulations. In general, OEMs and suppliers alike will likely

    2015 365 days—591 deals—$62.1 billion total aggregate disclosed value need advanced manufacturing capabilities to leverage global platforms while still catering to local / niche preferences.

    • Mobility solutions are becoming a focus in automotive. As tradition, automotive vehicle manufacturers, suppliers, dealers and others try to capitalize on the changing consumer trends toward ride-sharing, car-sharing and autonomous vehicles.

    • The drive for a more connected car leads to cyber security threats of vehicles. Hacking an automobile’s electronic system can cause serious danger, leaving automotive companies thinking of ways to protect consumer trust in automotive connectivity.

    Deal volume: Global automotive deal volume is on-par with pre-recession levels, transacting 591 deals. In comparison to 2014, this represents a 9% increase.

    Deal value: Global automotive deal value rose to 62.1 billion—a massive increase of 60% over 2014 and its highest level since 1999.

    Deal size: Globally, average automotive deal size increased by a rousing 81%, primarily driven by megadeals.

  • Driving value 5 2015 Automotive M&A Insights

    Global Auto M&A Deals by Disclosed Value 2010-2015

    Global Automotive M&A Deal Volume and Value 2003–2015

    Global automotive

    In many respects, the financial strength of the automotive industry is back. This is evidenced by deal value increasing by 60% in 2015 up to $62.1 billion, the highest value of deals in 16 years. Much of this increase in deal value is driven by 12 megadeals with a total aggregated disclosed value of $46.3 billion, the largest of which was ZF Friedrichshafen AG’s $12.5 billion acquisition of TRW Automotive Holdings Corp.

    Average global auto deal size increased 81% from $214 million to $388 million. This also marks the highest average deal value in the past decade and almost 3 times its low in 2010.

    Further, of the 160 disclosed deals, the number of megadeals (value greater than $1.0 billion) increased from 6 to 12 in 2015 and 32 deals were between $100 million and $1.0 billion. Continuing the trend from 2014, larger megadeals have led to a significant increase in overall average deal value in 2015.

    0

    20

    40

    60

    80

    100

    120

    140

    0

    100

    200

    300

    400

    500

    600

    700

    2014 201520132012201120102009200820072006200520042003

    Disclosed deal value UST Facilitated investments

    Source: Thomson Reuters and other publicly available sources.

    Deal volume (R-Axis)

    D is

    cl o

    se d

    d ea

    l v al

    ue ($

    b n)

    D eal vo

    lum e

    591588

    515

    584 594 604

    549 532520

    $6 594

    490

    543

    465

    $21 $26 $41 $49 $57 $32 $46

    $70

    532

    $25 $45 $30 $22 $39 $62

    Sovereign Wealth Investment

    0

    50

    100

    150

    200

    250

    300

    2014 20152013201220112010

    $1 bn

    Source: Thomson Reuters and other publicly available sources.

    31

    $140

    Average deal size (R-Axis)

    D ea

    l v o

    lu m

    e o

    f d

    is cl

    o se

    d d

    ea l v

    al ue

    A verag

    e d isclo

    sed d

    eal value ($b n)

    0

    50

    100

    150

    200

    250

    300

    350

    400 $388

    $186

    $141

    $21424

    58

    35

    $161

    32 37

    147 176 147 117 138

    32

    12

    116

    6

    5

    6

    7

    6

  • Driving value 6 2015 Automotive M&A Insights

    Megadeals Breakdown 2010–2015

    Global automotive, cont.

    Megadeals in 2015 were double the amount in 2014 and account for 75% of overall deal value. 2015 saw the highest megadeal value and highest share of total deal value in the review period. The 12 megadeals in 2015 is the highest number of megadeals in the review period, excluding the US Treasury Facilitated Investments.

    PwC’s Autofacts expects the industry to add 21 million units of production between 2015 and 2021, for a compounded annual growth rate (CAGR) of 4%. (PwC Autofacts 2016 Q1 Data Release) Along with record growth, there are unprecedented global challenges that are influencing business strategies and actions in many industries.

    Cross-sector M&A

    As evidenced in the chart below, recent global cross-sector M&A is trending upward, though not at the same rate as the automotive industry. In 2015, both deal volume and value increased by 3% and 26% respectively.

    0

    20

    40

    60

    80

    100%

    2014 20152013201220112010

    Non-Megadeal % of Value Megadeal % of Value

    Source: Thomson Reuters and other publicly available sources.

    6

    Megadeal Volume

    P er

    ce nt

    0

    2

    4

    6

    8

    10

    12

    14

    7

    5

    6

    56% 53% 52%

    6

    46% 65%

    75