Automotive Newsletter Q2 2020
Overview of M&A activity
The consequences of the global lock-down as a result of COVID-19 have further unfolded in Q2 2020. The number of completed deals in the automotive sector decreased by 42% alongside a significant drop in deal value from €2.1bn to €376m, compared to Q2 2019. Many OEMs and suppliers are currently focused on operational and financial restructuring. Another effect of COVID-19 is the growing number of insolvencies, which is expected to even increase further in Q3 and Q4 2020.
EV/Sales, EV/EBITDA and EV/EBIT multiples for the automotive peer groups are inflated due to declining revenues and low profitability, especially for the year 2020. 2021 multiples are more meaningful, as the market recovery, which is already anticipated in the EV‘s, will also lead to an increase in earnings. For 2021, EV/Sales multiples have decreased by 8.4% in Europe but increased in North America by 18.2% and in Asia by 23.7%, in comparison to Q1 2020. On EV/EBITDA level, 2021 multiples have increased for all regions, by 8.5% in Europe, 24.5% in North America and 32.4% in Asia.
Governments across the globe are in the process of easing the widespread concerns and economic hardship for consumers, businesses and communities by providing financial aid to car manufacturers and suppliers on the one hand and softening market access requirements and regulations, for i.e. new energy vehicle manufacturers, on the other hand.
M&A Activity: Quarterly Comparison Q2 2019 - Q2 2020
Top M&A Deals Q2 2020
- TVS Motor Company Limited has acquired Norton Motorcycles, the UK-based company engaged in the business of manufacturing the iconic “Norton” and allied brand motorcycles, for a consideration of €18m. The acquisition will enable TVS to grow its supply chain capabilities and expand into new markets
- Abac Capital has sold Spain-based auto parts specialist Metalcaucho to BBB Industries, a Genstar Capital portfolio company for a consideration of €200m. The transaction will help BBB Industries to expand its market reach and serve its customers more efficiently
- A group of investors led by Fosun RZ Capital have acquired an undisclosed stake in IRP Systems, an Israel-based provider of electric powertrain products for electric vehicles, for a consideration of €16m. The transaction will support IRP Systems significantly to expand and enhance its business in the APAC region and especially in the Chinese market
- China-based Evergrande Health Industry Group Limited, which is engaged in media and healthcare businesses and listed on the Hong Kong Exchange, has agreed to acquire the remaining 17.6% stake in National Electric Vehicle Sweden AB (NEVS), a Sweden-based manufacturer of electric automobiles, for a consideration of €334m from Mr. Kai Johan Jiang, a private investor. Post acquisition, NEVS will be a wholly-owned subsidiary of Evergrande
Selected Recent Global Automotive Bond Issuances Q2 2020
|Company||Date of Issuance||Account (in €m)||Coupon (in %)||Yield (Latest)||Price (Latest)||Maturity Date|
|Deere & Comp.||30.03.2020||750||3.750%||2.537%||125.22||15.04.2050|