While 2014 saw the first increase in automotive deal size and volume in three years – including the largest automotive deal ever with Volkswagen buying Scania –the industry is not expected to rest on its laurels in 2015 as sectors including vehicle manufacturers and component suppliers are facing pressure to meet technology and production demands around the world.
(View a 2015 automotive key trends infographic.)
“Last year was a return to pre-recession levels of activity with deal value off the charts, deal volume up and average deal size boosted by megadeals, including VW taking over Scania. And 2015 shows no signs of slowing,” said Paul G. Elie, U.S. Automotive Deals Leader, PwC. “With production increasing globally, the continued focus on connected vehicles forcing suppliers to find new technologies around the world and OEMs needing partners to help make these innovations a reality, 2015 is poised to be another positive year in terms of M&A activity.”
Vehicle assembly worldwide in 2014 – despite numerous, large recalls and political and economic uncertainly in certain regions – grew nearly 3 percent to 86.2 million units. PwC Autofacts expects 23 million units to be added to global assembly by 2021, a compounded annual growth rate of 3.4 percent which will necessitate global automakers evolving production strategies around the world. This will create the potential to seek partnerships and develop collaborative strategies for navigating the pace of global change.
Additionally, the supply base also will need to continue to expand its global footprint and technology offerings, in many cases not simply by relying on internal R&D to bring advances to market, but also innovating through acquisitions. Case in point, in PwC’s 2014 CEO Survey, 86 percent of U.S. CEOs said technological advances will transform their businesses over the next five years.
Perhaps more than any other trend however, the undeniable road to the “ultimate connected car” will be a force in propelling M&A activity. Over the long-term, PwC anticipates M&A playing a vital role in the development and integration of new technologies that will improve safety, fuel efficiency and connectivity.
While the pace and timing of change will certainly depend on the economic markets around the world in the coming years, the proliferation of the connected vehicle will no doubt be a key factor for some time.
Last year’s M&A numbers were impressive with vehicle manufacturers and component suppliers experiencing the largest deal volumes since 2009. Manufacturers, suppliers and others including retail/dealership, aftermarket, rental/leasing and wholesale also saw the number of deals increase in 2014. While predicting specifics for this year is difficult, all signs point to continued impressive numbers.
Other key factors that PwC expects will fuel future M&A growth include:
- High levels of liquidity on corporate balance sheets
- Strong economic recovery and pent-up demand in developed countries, such as the U.S.
- Resumption of trend line economic growth in China and India
- The continued effects of global megatrends including climate change, urbanization – the United Nations estimates that this year there will be 22 megacities globally with populations of more than 10 million people, and 17 will be in developing economies – and energy demand, which is expected to increase globally by 50 percent by 2030.
For more information, visit PwC’s automotive industry website at www.pwc.com/auto.
