M&A Emerges as Primary Growth Driver with Auto Volume Uncertainty

Cyclical concerns shape the acquisition strategies of OE suppliers and aftermarket companies.

Monday, September 19, 2016

Most discussions involving the automotive industry over the past year have focused on where we are in the market cycle. Underlying these conversations is a widespread belief that the industry is due to experience some degree of contraction soon. In 2016, North American vehicle production will reach 18 million units; this marks the seventh consecutive year of growing production volumes, the longest such streak in the industry’s history.

Despite the cyclical concerns, there are many factors that suggest that the next several years will represent more of a plateau than a significant decline for the auto industry. While the industry had never previously seen a seven-year expansion phase, it is also true that the industry has never seen a downturn anywhere near the magnitude of 2008 and 2009. Despite the recent production growth, dealers’ inventory levels have remained steady over the past three years. Furthermore, the economic recovery in the United States has resulted in stable employment and strengthening consumer credit.

While it remains to be seen whether the auto industry will be breaking, coasting, or accelerating over the next few years, thoughts about the market cycle are shaping M&A activity in 2016. In this issue of The Deal Engine, we examine these and other trends affecting the deal-making landscape for automotive supply companies.

Highlights include:

  • Underlying macroeconomic factors provide comfort to the industry’s future
  • Supply versus aftermarket: lines continue to blur, but suppliers increase focus on core businesses
  • Suppliers turn to consolidation to gain market share
  • Despite electric hype, lightweighting and powertrain efficiency play leading roles in meeting 2025 CAFE standards
  • M&A, capital-raising, and public comp stats from across the automotive supply industry


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