M&A Revving up for Automotive and Global Chemicals, Cool for Industrial and Global Metals

PricewaterhouseCoopers updates outlook for mergers and acquisitions, offers advice for M&A due diligence in the 'New Normal'


New York — May 12, 2010 — Mergers and acquisitions activity is set to pick up in the automotive sector and will drive significant changes in the industry, but M&A appears to be off to a slow start in the industrial manufacturer space, according to new reports from PricewaterhouseCoopers LLP (PwC).

Meanwhile, PwC suggests that M&A deal activity for global chemicals sector remains strong so far this year, while activity in the global metals sector has improved moderately to date in 2010.

Automotive Revs Up

Automotive M&A activity will continue to drive the fundamental changes necessary for the near-term restructuring and long-term sustainability of the industry, and the deal market will play a critical role as market participants pursue transactions with a focus on synergies, including cost savings and adding revenue to their business, according to the PwC report "Drive Value — Automotive M&A Insights 2009."

"The current deal environment is showing positive signs and presents a number of opportunities for both strategic and financial buyers who have access to financing," said Paul Elie, U.S. automotive transaction services leader at PwC.

"Companies with stronger operating models and cash positions will likely leverage M&A to develop a competitive advantage through the consolidation of scale and expertise," emphasized Paul McCarthy, U.S. automotive strategy leader at the consultancy.

The publication highlights a variety of factors driving the deal market in 2009 and provides an outlook for 2010 and beyond. According to the report, automotive M&A deal value soared to $121.9 billion for 2009, up 286 percent from $31.6 billion in 2008.

The increase in deal value was influenced heavily by the U.S. Treasury investment in the vehicle manufacturing sector, which occurred in response to a near collapse of the automotive industry. Players across the automotive value chain reacted as they sought capital infusions, shed noncore assets, renegotiated debt obligations and pursued mergers of necessity.

Despite the record high deal value in 2009, the total deal volume fell to 532 transactions, representing a 3 percent decline from an already weak 2008 level and its lowest point since 2004.

"As we look forward, companies are likely to increase their focus on growth and the traditional drivers of M&A — driving economies of scale, acquiring technology and expanding their geographic and customer base," said Elie.

Automotive companies seeking long-term success will drive the deal market in 2010 by developing and executing strategies for sustainable growth and value creation, PwC added. The report is available at http://www.pwc.com/auto.

Industrial Weaker than Expected

M&A deal activity in the global industrial manufacturing (IM) industry was weaker than expected during the first quarter of 2010, as total deal value and volume declined on a year-over-year basis and sequentially, according to the PwC report "Assembling Value: First quarter 2010 Global Industrial Manufacturing Mergers and Acquisitions Analysis."

In the first quarter of 2010, there were only 11 announced deals with total transaction values greater than $50 million, representing a decline from the 16 deals announced in Q1 2009 and 31 deals in Q4 2009.

In terms of value, deals totaled $1.9 billion in the first quarter of 2010, compared with $2.0 billion and $9.6 billion in the first and fourth quarters of 2009, respectively. Despite the decline in deal volume and total value, average deal value in the first quarter of 2010 increased on a year-over-year basis to $200 million in Q1 2010 compared to $100 million in Q1 2009.

"While expectations for deal activity in Q1 were weak relative to the fourth quarter 2009 results, the belief was that year-over-year trends would improve. However, this was not the case," said Barry Misthal, U.S. industrial manufacturing leader with PwC. "Though the year is off to a slow start, we believe the deal environment will improve throughout 2010 as credit availability continues to loosen and risk aversion continues to moderate."

Smaller deals (valued at $50 million or less) and transactions with undisclosed values dominated overall activity, which is consistent with historical trends. The level of mid-market, large and mega-deal activity continued to be constrained, although the near-term outlook for a turnaround is favorable, according to the report.

Bookmark and Share
This content continues onto the next page...
  • Enhance Your Experience.

    When you register for SDCExec.com you stay connected to the pulse of the industry by signing up for topic-based e-newsletters and information. Registering also allows you to quickly comment on content and request more infomation.

Already have an account? Click here to Log in.

Enhance Your Experience.

When you register for SDCExec.com you stay connected to the pulse of the industry by signing up for topic-based e-newsletters and information. Registering also allows you to quickly comment on content and request more infomation.

OR

Complete the registration form.

Required
Required
Required
Required
Required
Required
Required
Required
Required
Required
Required