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Global Automotive M&A Deal Activity is Expected to Exceed 500 Deals by Year's End, reports PricewaterhouseCoopers LLP

The global automotive M&A deal volume in the first half of 2008 remains relatively strong based on data analysed by PricewaterhouseCoopers: the market still appears to be on course to exceed 500 closed deals for the tenth of the past eleven years, as was anticipated in Drive Value, PricewaterhouseCoopers' 2007 Automotive M&A insights publication.

Paul McCarthy, U.S. automotive transaction services strategy leader, PricewaterhouseCoopers LLP, said:

“It is difficult to compare 2008 to the activity of 2006 and 2007 because they were booming years for automotive deals. With the decline of 'mega-deals', there has been a large decline in the overall disclosed deal value. However, deal volume has seen only a moderate decline. “

The global credit crunch and economic downturn in the U.S. has led to a decline in deal volume from the high levels seen in 2007. However, the first half of 2008 shows activity similar to the same time period in 2005, and represents only a slight decline from the average first half of the year deal volume between 2005 and 2007. A total of 289 deals and disclosed value of $13.2 billion were closed in the first half of 2008, compared to 333 deals and disclosed deal value of $19 billion in the first half of 2007. Overall disclosed deal value has fallen 30% from the first half of 2007 and is down 25% from the average first half of the year's disclosed deal value during the prior three years.

The three largest disclosed deals combined to account for almost $8 billion, or more than 50% of the total disclosed deal value for the first half of 2008. The total 2008 deal value could grow significantly if a major transaction is closed in the second half of the year.

On a regional basis, Asia and the U.S. had similar levels of deal activity, with Asia recording 73 transactions with a disclosed value of $2.2 billion and the U.S. recording 82 transactions with a disclosed deal value of $2.0 billion. If regional disclosed value trends persist for the rest of 2008, the U.S. share of global disclosed deal value will be at its lowest level in the past seven years.
A strong level of outbound deal flow from Asia suggests that automotive companies in developing markets are poised to accelerate expansion into the global marketplace.

Paul McCarthy also said:

“We are observing the early stages of an increasing trend of emerging market players acquiring major companies in established markets in order to achieve access to global customers, markets and technology.“

Ladislav Juza, an expert on automotive sector, PricewaterhouseCoopers Czech Republic, added:

“On the Czech market, we saw acquisitions of Czech companies, now also by east Europe companies. The most interesting deal in the Czech Republic in the period under review was purchase of Fezko, which was bought by the Michel Thiery Group, a French automotive and textile company.“

The devaluation of the U.S. dollar has not attracted increased foreign investment to date. This is likely the result of weakness in the U.S. economy and its automotive market, which appears to be causing would-be acquirers to reconsider or delay U.S. M&A investments until they have more clarity about the magnitude of downside risk.

Paul Elie, U.S. automotive transaction services leader, PricewaterhouseCoopers LLP, added:

“The automotive sector continues to restructure in response to the challenges of a changing global economy. Management of rising commodity costs and manufacturing footprint realignment will be the keys to success in the global automotive industry in the next decade. M&A continues to play a major role and serves as a catalyst to help advance this transformation of the industry. “