TRAVERSE CITY, Mich.—Mergers and acquisitions will continue at a high volume this year, even as uncertain politics and trade friction complicate strategic planning around the world, according to a report released July 31.
Factors that will drive deals through the uncertainty include nontraditional companies' desire to enter the auto industry, the allure of powertrain technology suppliers and a scramble to buy suppliers in Asia, particularly in China, said Dietmar Ostermann, U.S. auto advisory leader of PwC's Detroit office.
PwC forecasts that supplier M&A will come in at about $41 billion worth of deals in 2018, about flat with 2017. But significantly, the activity is showing no sign of cooling, Ostermann said.
The study reports that European suppliers are the most financially fit to make acquisitions. Four of every 10 deals this year have been undertaken by European companies.
At the same time, a third of all assets being acquired also are European, PwC reports. And powertrain-related businesses are leading the global M&A procession.
In contrast, PwC found that suppliers in South Korea are the most distressed assets being reviewed for mergers or acquisitions.
One of the industry's biggest acquisitions this year was the hostile takeover of driveline supplier GKN by the diversified British investment group Melrose Industries, a deal valued at $11 billion.
PwC flagged several key trends as it tracks mergers and acquisitions around the industry. It forecasts that:
- Nontraditional suppliers will play a bigger role in a bid to enter the industry.
- Chinese buyers will initiate more deals inside China as that industry consolidates.
- The need to develop new capabilities—as opposed to building market share—will be the driving force for M&A.
- Smaller suppliers will face increasing difficulties competing.