Bloomberg News

Auto Parts M&A to See Fewer, Larger Transactions, PwC Says

August 15, 2013

Auto suppliers probably will conduct fewer, larger acquisitions this year as rebounding auto sales reduce opportunities for deal making, according to a study by PricewaterhouseCoopers LLP.

Auto-supplier deals should decline more than 25 percent this year to about 180, the lowest figure since at least 2006, when PwC began its annual study. The value of those transactions may rise about $3 billion from last year and top $14 billion, the largest amount since 2009, PwC forecasts in its study, which examined data and executive comments to assess suppliers as buyers, sellers or financially distressed companies.

“The U.S. auto industry grew nicely over the last four years,” Dietmar Ostermann, the Detroit-based head of PwC’s global auto advisory practice, said in an interview. “They’ve been just running flat out and making a lot of money. They are looking very, very strong, particularly when compared to the Europeans and the Japanese.”

U.S. auto sales are on track for the best year since 2007, driven by an aging fleet, low interest rates and competitive lease deals.

That success is part of the problem, Ostermann said. A slump in auto sales in Europe, where the economy has contracted for a record six quarters, has left fewer suppliers in shape to acquire companies. Much of the big, post-recession growth in the U.S. has already occurred as the market has rebounded from a 2009 low of 10.4 million vehicles to a seasonally adjusted pace of 15.8 million in July, according to researcher Autodata Corp.

‘Almost There’

“They looked at the market opportunity a few years ago -- 10.6 million to potentially back to 16.5 million and said, ‘That’s a long runway,’” he said. “The fact is, we’re almost there now.”

North American auto suppliers are most likely to be the buyers, PwC forecasts. The largest deal so far this year closed in February when DuPont Co. (DD:US) sold its auto-paint unit to Carlyle Group LP (CG:US) for $4.9 billion in February.

“There are other big ones coming,” Ostermann said. “If any of those big deals happen, or even two or three, then the total value for the year could be bigger than 2012 or 2011.”

TI Automotive, the closely held Auburn Hills, Michigan-based auto-parts maker, is exploring options including a sale that may fetch about $1.5 billion, said people with knowledge of the matter.

Johnson Controls Inc. (JCI:US) agreed to sell its HomeLink product line to Zeeland, Michigan-based Gentex Corp. (GNTX:US) for $700 million. Milwaukee-based Johnson Controls is trying to sell the rest of its automotive-electronics unit.

Auto-parts companies made 243 acquisitions worldwide worth $11 billion last year, down from a record 303 deals in 2011, PwC said.

Private-equity firms are becoming more involved in auto-supplier acquisitions, representing about 21 percent of all deals in the past 12 months, compared with 10 percent in 2012, according to the study.

To contact the reporter on this story: Mark Clothier in Southfield, Michigan, at mclothier@bloomberg.net.

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net.


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Companies Mentioned

  • DD
    (EI du Pont de Nemours & Co)
    • $65.54 USD
    • -0.01
    • -0.02%
  • CG
    (Carlyle Group LP/The)
    • $33.5 USD
    • -0.18
    • -0.54%
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