Automotive Newsletter Q4 2020
Overview of M&A activity
Despite another increase in COVID-19 case numbers globally, transaction activity increased sharply in Q4 after slowly picking up in Q3 and is now well above 2019 levels. The number of completed deals in the sector increased from 37 to 80 (+116%) on a year-on-year basis. Accordingly, the deal value increased drastically in Q4 2020 (€9bn) compared to Q4 2019 (€1.6bn), mainly driven by the BorgWarner/ Delphi Technologies and Luminar Technologies transactions. The increasing number of distressed M&A situations, carve-outs, supplier consolidation and catch-up effects positively impacted deal activity in Q4 2020.
Across all automotive peer groups, EV/Sales, EV/EBITDA as well as EV/EBIT multiples for 2020 remain inflated, following the trend of the previous nine months. The cause for this is a sharp decline in revenues and lower profitability resulting in less meaningful multiples for 2020 compared to 2021 multiples as the anticipated market recovery, reflected in the EVs, will also lead to an increase in earnings. For Q4 2020, EV/Sales 2021 multiples have increased by 16.5% in Europe, 21.8% in North America and in Asia by 10.4%, in comparison to Q3 2020. EV/EBITDA 2021 multiples have also increased for all regions, by 6.6% in Europe, 17.6% in North America and 6.1% in Asia.
In recent months, the automotive industry has shown resilience not least due to extensive stabilisation measures taken by governments. After the economic downturn in spring 2020, the industry has recovered in Q3 and Q4 and achieved year-on-year growth in new car sales in China, Europe and the USA in the last two quarters.
M&A activity: quarterly comparison Q4 2019-Q4 2020
Top M&A deals Q4 2020
- Weifu High-Technology Group Co., Ltd. has acquired Borit NV, a Belgium-based leading manufacturer of fuel cell metal bipolar plates, for a total cash consideration of approx. €43m. With the acquisition of Borit, Weifu is able to quickly enter the metal bipolar plate fuel cell market which is in line with Weifu’s e-mobility strategy.
- BorgWarner Inc. has acquired Delphi Technologies PLC for approx. €1.3bn in an all-stock deal. The combination of BorgWarner and Delphi Technologies is expected to strengthen BorgWarner’s electronics and power electronics products, capabilities and scale, creating a leader in electrified propulsion systems that BorgWarner believes is well-positioned to take advantage of future propulsion migration.
- Luminar Technologies, Inc., the global leader in automotive lidar hardware and software technology, and Gores Metropoulos, Inc., a special purpose acquisition company sponsored by an affiliate of The Gores Group, LLC and an affiliate of Metropoulos and Co., have completed a reverse takeover transaction with a deal value of €2.3bn. The combined company will retain the Luminar Technologies, Inc. name and will commence trading on Nasdaq. The transaction will accelerate Luminar's commercial growth and will expand its product portfolio.
- Volkswagen AG via its wholly-owned subsidiary, Volkswagen (China) Investment Company Ltd. has acquired a 50% stake in Jianghuai Automotive Group Holding Co., Ltd., a China-based company engaged in the development of passenger cars and powertrains, for a total consideration of approx. €274m via a capital injection.
Selected recent global automotive bond issuances Q4 2020
|Company||Date of issuance||Amount (in €m)||Coupon (in %)||Yield (latest)||Price (latest)||Maturity date|
|Jaguar Land Rover||13.10.2020||571||7.750%||5.746%||108.24||15.10.2025|