Automotive Newsletter Q3 2020
Overview of M&A activity
The COVID-19 pandemic had a significant negative impact on the automotive sector and related M&A activity in H1 2020. However, in Q3 2020 deal activity slowly picked up pace but is still notably below 2019 levels. The number of completed deals in the sector decreased from 56 to 42 (-25%) on a year-on-year basis. However, the deal value is largely unchanged in Q3 2020 (€2.1bn) compared to Q3 2019 (€1.9bn), mainly driven by the ZF Friedrichshafen/ ABCO India transaction. The increasing number of distressed M&A situations as well as carve-outs positively impacted deal activity in Q3 2020. Nevertheless, the vast majority of players in the automotive industry continue to focus on operational and financial restructuring, resulting in lower M&A activity.
Across all automotive peer groups, EV/Sales, EV/EBITDA as well as EV/EBIT multiples for 2020 remain inflated, driven by a sharp decline in revenues and lower profitability. This results in less meaningful multiples for 2020 compared to 2021 multiples as the anticipated market recovery, reflected in the EV’s, will also lead to an increase in earnings. For 2021, EV/Sales multiples have increased by 6.6% in Europe, 8.8% in North America and in Asia by 10.0%, in comparison to Q2 2020. EV/EBITDA 2021 multiples have also increased for all regions, by 10.5% in Europe, 6.5% in North America and 6.0% in Asia.
To stabilize the economy and mitigate the impact of COVID-19, governments across the globe acted swiftly and passed widespread financial aid programs on an unprecedented scale to support consumers, businesses, and communities. The positive effect became apparent in Q3 2020 with recovering car sales after they bottomed in Q2 2020.
M&A Activity: Quarterly Comparison Q3 2019-Q3 2020
Top M&A Deals Q3 2020
- Delfingen Industry S.A. has acquired Schlemmer GmbH’s operations in Europe and Africa. Schlemmer is a Germany-based producer and supplier of cable protection systems, electronic engineering parts and special components for automotive and other industries. The acquisition will allow Delfingen to strengthen its relationships with German car manufacturers and equipment suppliers, and to pool research and development efforts to support the transition of the automotive sector towards hybrid/electric engines
- ND Group B.V. has acquired Next.e.GO Mobile SE, along with its management, for an undisclosed consideration in an MBO deal, under insolvency. Founded in 2015 and headquartered in Germany, Next.e.GO Mobile SE is an electric cars manufacturer with a reported valuation of €1bn prior to filing for bankruptcy during the COVID-19 pandemic
- ZF Friedrichshafen AG has acquired a 25% stake in WABCO India Ltd., a listed India-based supplier of braking control systems, technologies and services, for a consideration of €431m. Together, ZF and WABCO will form a leading integrated systems supplier for commercial vehicle technology, creating added value for ZF’s customers
- US-based Rivian Automotive, a developer of electric self-driving trucks has raised USD 2.5bn in a funding round led by T. Rowe Price Associates, Inc. The influx of money helps to further establish Rivian’s position as well-capitalized EV company prior to the launch of its first two vehicles in 2021
Selected Recent Global Automotive Bond Issuances Q3 2020
|Company||Date of Issuance||Amount (in €m)||Coupon (in %)||Yield (Latest)||Price (Latest)||Maturity Date|