Translink Unveils Latest M&A Automotive Insights Report

Translink Corporate Finance has unveiled the latest M&A Automotive Insights Report FY 2023/24, shedding light on the evolving dynamics of the automotive sector amidst market uncertainties and transformative shifts.

In 2023, the automotive sector witnessed a decline in the number of transactions, totalling 875, representing a 19% decrease compared to 2022. Despite this downturn, the sector remains strategically vital for major economies worldwide. Transaction volumes, although lower than in previous years, surpassed pre-Covid-19 levels, underscoring the enduring significance of the automotive industry.

The M&A activity in the automotive sector is propelled by various factors, including market changes, disruptions, and industry consolidation. Strategic buyers continue to drive M&A transactions, navigating through market uncertainties and seizing opportunities for growth and innovation.

Amidst ongoing market uncertainties, several positive trends emerged in 2023:

• EV Growth: The International Energy Agency (IEA) reported a surge in electric vehicle (EV) registrations, reaching close to 14 million worldwide. EV sales soared by 35% compared to 2022, signalling a consumer shift towards sustainable mobility and driving investments in electrification technologies.
• Supply Chain Improvements: Chip shortages, a major bottleneck for automotive production, began to ease, enabling a rebound in production and sales.
• Technological Advancements: Continued adoption of digital technologies in connected cars, Advanced Driver Assistance Systems (ADAS), and AI contributed to a safer and more efficient automotive industry.
• Sustainability Focus: Beyond EV growth, initiatives to enhance the eco-friendliness of Internal Combustion Engine (ICE) vehicles, the rise of plug-in hybrid electric vehicles (PHEVs), and sustainable production practices gained traction, reflecting a broader commitment to environmental sustainability.

Key players in the automotive industry initiated strategic initiatives to fortify their market positions amidst the challenging M&A environment.

Signs of recovery

While deal volumes and EV/EBITDA ratios experienced contractions in 2023 due to macroeconomic and geopolitical headwinds, there are signs of recovery. The median EV/EBITDA ratio, although lagging below the 24-month moving average, indicates potential for industry transformation and market resurgence.

Globally, valuations of American automotive businesses outpace those in Europe and the Asia-Pacific (APAC) region, driven by the emphasis on EVs and vehicle innovation. APAC valuations, bolstered by increasing global prominence, fare relatively better than Europe’s, although both regions witnessed downward trends by the end of 2023.

Insights from the report:

The report deep dives into three industry sub-sectors – OEMs, Components and Dealers.

Additionally, it looks at key factors that shaped the industry in 2023 – such as climate change, technology, and legislation – as well as giving Translink experts’ forecasts for the sector for 2024.

Stuart Hands, Global Head of the Automotive Group and Managing Director of Translink CF UK, forecasts that global M&As will comprise active, regional acquisitions of EV start-ups. He said, “Potential mergers for synergies will feature with strategic manoeuvring as companies battle for position in a rapidly transforming economy.”

Overall, our experts believe the automative M&A market will stay active, with consolidations driven by technological advancement, market expansion strategies, and the continued need for innovation.

With five decades of experience and an immense global network, Translink advisers are the perfect partners to navigate the automative landscape and get the deal done, stewarding every transaction from start to completion.

View the full Translink CF M&A Automotives Insights Report FY 2023/24 here

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