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PwC Says 2018 a Big Year for Big Deals

According to a new study of deals in the auto industry in 2018—as in acquisitions—conducted by PwC, even though the deal volume (903 for the year) was flat compared with 2017, the total deal value—$97.5-billion—was up 101 percent compared to 2017, in large part because nearly all of the acquirers “were focused on product expansion (buyers better positioning themselves for the vehicles of the future) or driving economies of scale.” Of the deals, there were what PwC describes as “mega-deals,” which were valued at $5-billion and over.
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According to a new study of deals in the auto industry in 2018—as in acquisitions—conducted by PwC, even though the deal volume (903 for the year) was flat compared with 2017, the total deal value—$97.5-billion—was up 101 percent compared to 2017, in large part because nearly all of the acquirers “were focused on product expansion (buyers better positioning themselves for the vehicles of the future) or driving economies of scale.”

Of the deals, there were what PwC describes as “mega-deals,” which were valued at $5-billion and over. One was something of a mega-mega deal, the acquisition of Johnson Controls Power Solutions business—such as 12-volt car batteries—by an investment group for $13.2-billion.

JCI

That was followed by the acquisition of GKN by Melrose Industries for $11-billion; Magneti Marelli by CK Holdings for $7.1-billion; Federal-Mogul by Tenneco for $5.4-billion; and Bhushan Steel by Bamnipal Steel for $5.2-billion.

The PwC analysts see more acquisition activity for 2019 because “Industry consolidation continues to be a key strategy to reduce cost and drive increased shareholder value. The sector remains fragmented, and there continues to be opportunities for consolidation in order to drive economies of scale.”

What’s more, they believe that in addition to mergers and acquisitions there will be more partnerships and joint ventures as companies look to address “shifts in technologies, whether it is electric, light weighting, connectivity, autonomous, or other trends.”

As for the geographical location of where the acquiring companies were based, Asia and Oceania had 42 percent of the overall deal value and 41 percent of the acquirer volume.

In terms of the sub-sector that lead in deal value, it was Parts and Components manufacturing, which had 69 percent of the total. Again, this is a consequence of suppliers seeking “scale, product expansion, and strategic advantages in tomorrow’s leading tech.”

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