Number of Automotive Deals Hits Speedbump in Third Quarter

October 26, 2018

Post image for Number of Automotive Deals Hits Speedbump in Third Quarter

By Jeff Zaleski

Through the first three quarters of 2018, global automotive M&A deal value is at a ten-year high. While all signs point to a banner year for deal activity, we want to level expectations as Q3 also saw the lowest number of deals in the past 12 quarters. Here is the topline data from our Global Automotive Deals Insights Q3 2018:

  • Value: $18.3B, up 103% compared to Q3 2017
  • Volume: 177 deals, down 6% compared to Q3 2017
  • Average deal size: $217.9M, up 69% compared to Q3 2017

We believe the dip in the number of deals coupled with higher values points to a supply problem – there are too many buyers chasing too few deals. This could explain the shift in financial vs. strategic investor activity. While recent quarters showed an uptick in financial investor activity, they took a backseat in Q3 as strategic investors were responsible for 91% of deal value and 81% of volume. Accounting for only 33 deals, financial investor activity reached the lowest number in the past three years. Despite the recent dip in financial investor activity, we’re not ready to view this as a trend and believe they will show a strong interest in the short term due to record high amounts of dry powder available.

As noted in previous quarterly reports and blogs, the Parts and Components Manufacturing category continues to lead M&A transactions. In Q3, the sector was responsible for the majority (58%) of deal value. Vehicle Manufacturing followed, accounting for 27% of deal value. Automotive Retail and Wholesale, and Maintenance, Repair and Other Services were responsible for the remaining 15% of deal value. Of note, the number of deals was down for the third consecutive quarter across these three major subsectors that account for the majority of industry transactions.

On a regional basis, Asia and Oceania continue to lead the way as they dominated deal value with 45%. This is in large part due to eight deals worth between $495M and $1.2B each. North America, while not far behind, was second with 35% of deal value.

We expect to see further investments in technologies through 2019 as companies look to navigate the evolution of autonomous and connected vehicles, particularly in developed markets like North America and Europe. Consolidation and product diversification will continue to drive M&A activity in emerging markets.

We won’t argue the numbers. The global automotive industry has had a strong year for M&A to date. Concerns over rising interest rates, tariffs and trade continues to be at the top of agendas for boardrooms and deal makers though, making it difficult to forecast future deal activity.

The number of deals has been trending down the past two quarters, however, we see this as more of a speed bump than a trend. A copy of our Q3 2018 report can be downloaded here.

©2018 PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

Print Friendly, PDF & Email

Comments on this entry are closed.

Previous post:

Next post: