TRAVERSE CITY, Mich.— Seemingly unworried about wobbly global markets, automotive suppliers are wheeling and dealing to acquire each other or dump underperforming assets.
Spending appears to be down from a year ago, but the numbers are deceiving.
In the first six months of 2016, buyers closed 85 deals to acquire automotive suppliers, up from 84 deals a year earlier, according to PricewaterhouseCoopers.
But the value of supplier M&A deals in the first half totaled $10.1 billion, just more than half of the $20.0 billion spent a year earlier.
That would be the first time that the value of supplier acquisitions has declined since 2010, according to PwC. But that's because last year's dollar figures were inflated by a single giant deal—ZF Friedrichshafen's $12.5 billion acquisition of TRW Automotive Holdings Corp., said Jeff Zaleski, PwC's U.S. automotive deals leader.
“We're off from a record high in 2015, but the market continues to be strong,” Zaleski said. “We think we'll have a positive M&A market in the next six months.”
Deal-making should be lively because suppliers have cash and investors are pressuring companies to dump noncore assets, Zaleski said. Europe, recovering slowly from its deep recession, should be a fertile market for M&A activity, he added.
“There is still a lot of consolidation to be done” in Europe, Zaleski said.
Fast-paced advances in self-driving cars, connectivity and fuel economy will keep the heat on suppliers to make deals, predicts Mark Wakefield, a managing director at AlixPartners.