Report: M&A activity to drive fundamental changes in global automotive industry in 2010

Automotive merger and acquisition (M&A) activity will continue to drive the fundamental changes necessary for the near-term restructuring and long-term sustainability of the industry, says PricewaterhouseCoopers LLP. According to the publication titled, Drive value — automotive M&A insights 2009, 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.

"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, PricewaterhouseCoopers LLP. "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, US automotive strategy leader, PricewaterhouseCoopers LLP.

The publication highlights a variety of factors driving the deal market in 2009 and provides an outlook for 2010 and beyond:

Global automotive M&A activity
Automotive M&A deal value soared to $121.9 billion for 2009, up 286% from $31.6 billion in 2008. The increase in deal value was influenced heavily by the US 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 three 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.

For more information on PricewaterhouseCoopers automotive deal capabilities and to download PricewaterhouseCoopers' Drive Value — Automotive M&A Insights 2009 publication, visit: www.pwc.com/auto.