As seen in this recent PwC article, global automotive M&A activity was strong in 2017. Automotive deal value increased 29.9% to $53.2b from 2016 to 2017 primarily as a result of two mega deals in the Auto-Tech sector, which PwC defines as “investments in connectivity, autonomous, electrification, ride-sharing and the software, sensors, intellectual property and other components that support these trends.” For 2018, it is expected that investments in the Auto-Tech sector will continue to drive global automotive M&A activity.
Auto-tech deals spark M&A activity
Auto-tech deal value increased from $5.3b in 2016 to $26.7b in 2017. Further, deal volume increased 28% from 50 deals in 2016 to 64 deals in 2017. The main auto-tech attractions in 2017 were driver assistance technologies and alternative powertrains, which include lithium ion battery manufacturing. Other significant investments were made in ride sharing/mobility services and online vehicle dealerships/trading platforms.
Further, while traditional automotive companies were acquiring tech companies, tech companies were also acquiring traditional automotive companies and other auto-tech companies.
Auto-tech attracts venture capital
Last year was a record-setting year for venture capital with 11,042 deals completed worth $164b. Despite the fact that the auto-tech sector is only a small portion of global venture capital, venture capitalists are showing interest in early stage auto-tech enterprises focused on artificial intelligence, software, and other mobility-related technologies. In 2017, venture capitalists injected significant capital into on-demand ride sharing applications, and electric and autonomous vehicles. PwC aptly predicts that the car of the future will be “electrified, autonomous, shared and connected.”
2018 will likely see continued investments in the auto-tech sector with particular focus on alternative powertrains, connected car technologies, ride sharing, artificial intelligence and predictive analytics.
As seen in 2017, Asian buyers will continue to be active given further consolidation opportunities, market growth and expected regulations that will drive the need for alternative powertrain technologies. Further, in the US, the recent and significant tax reforms will provide US-based companies and venture capitalists with more cash to drive M&A activity.
As such, 2018 has plenty of fuel it needs for another strong year of automotive M&A activity.
The author would like to thank Peter Choi, Articling Student, for his assistance in preparing this legal update.
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