Automotive Newsletter Q2 2021
Overview of M&A activity
The effects of the COVID-19 pandemic are no longer a major concern for the automotive industry, as government support programmes have allowed the industry to cope with the pandemic better than initially anticipated. Worldwide car sales are expected to increase by 8% this year and profitability will mostly return to pre-crisis levels in 2021.
Worldwide car sales are expected to increase by 8% this year and profitability will mostly return to pre-crisis levels
In terms of number of deals, M&A activity remained constant in Q2 2021 compared to Q1, with only a slight decrease from 59 to 53. The cumulative deal value has increased substantially in Q2 2021 (€13.3bn) compared to COVID-impacted Q2 2020 (€376m) and has also shown good momentum in comparison to Q1 2021, considering that the PSA/ Fiat Chrysler transaction accounted for the majority of the deal value in the past quarter (€19.1bn). Considerable activity in the areas of electromobility and autonomous driving continues to drive M&A activity in Q2 2021 with investments in companies such as Polestar, Cruise, or The Lion Electric Company.
In contrast to the uniformly decreasing multiples in Q1 2021, a mixed picture is emerging in Q2 2021. While the negative trend continues in the US, with EV/Sales, EV/EBIT and EV/EBITDA multiples down by 1.4%, 0.2% and 2.8%, respectively, in Asia EV/Sales, EV/EBITDA and EV/EBIT multiples increased by 1.5%, 1.6% and 0.2%, respectively. In Europe, EV/Sales and EV/EBITDA multiples rose by 5.1% and 3.9%, respectively, whereas EV/EBIT multiples decreased by 3.9% compared to the previous quarter.
Although the automotive sector is facing headwinds from semiconductor shortages due to supply chain disruptions, deal activity is expected to continue to increase in the second half of 2021. Drivers are the foreseeable end of the pandemic, better access to new sources of capital, especially SPACs, and investments in NEVs and innovative technologies.
M&A activity: quarterly comparison Q2 2020-Q2 2021
Top M&A deals Q2 2021
- Polestar Performance AB, the Sweden based electric performance car company, has raised €460m from a group of financial investors led by Chongqing Chengxing Equity Investment Fund Partnership, Zibo Financial Holding and Zibo Hightech Industrial Investment. The new investment sets the stage for future growth by deepening the resources available to accelerate Polestar’s product development and technological capability.
- Bosch Automotive Steering GmbH has sold its steering and transmission pump business to Munich-based private equity firm Fidelium Partners. The business unit encompasses around 900 employees worldwide, of which approximately 600 are based in Germany.
- Cruise LLC, the autonomous vehicle subsidiary of GM, has added Walmart as an investor in an extended fundraising round, which was initiated in Q1 2021 and led by Microsoft. Cruise LLC, the autonomous vehicle subsidiary of GM, has added Walmart as an investor in an extended fundraising round, which was initiated in Q1 2021 and led by Microsoft. The additional €630m investment will bring the total fund to around €2.3bn. The company, which claims to have a post-money valuation of more than €25bn is also backed by Honda, Softbank Vision Fund and funds managed by T. Rowe Price. The company, which claims to have a post-money valuation of more than €25bn is also backed by Honda, Softbank Vision Fund and funds managed by T. Rowe Price.
- The Lion Electric Company, a Canada based manufacturer of all-electric zero-emission urban trucks, buses and minibuses, has been acquired within a SPAC deal by Northern Genesis Acquisition Corp. for a total amount of €1.1bn. As a result of the deal, Lion Electric is listed on the New York Stock Exchange with NGA’s shareholders holding 20.5% of the public company which has a current market capitalisation of approx. €3.2bn.
- Garrett Motion Inc., the Switzerland based manufacturer of transportation systems such as turbochargers, engines, diesel tanks, and other related parts raised €1.1bn of new equity from Centerbridge, Oaktree and Existing Stockholders under an agreement to restructure the company out of insolvency proceedings. Garrett remains a publicly traded company and listed its common stock on Nasdaq.
Selected recent global automotive bond issuances Q2 2021
|Company||Date of issuance||Amount (in €m)||Coupon (in %)||Yield (latest)||Price (latest)||Maturity date|