Auto digitalisation drives M&A activity in car tech

The desire for increasingly advanced connectivity in cars will drive M&A in the automotive technology sector in 2016. The UK, and London corporate finance especially, is playing a key role in the European car tech scene, both in terms of recently acquired start-ups and total volume of car tech deals.

As new vehicle sales have skyrocketed, from 10.4 million units in 2009 to over 17 million expected this year, so has demand for such up-to-the-moment perks as “smart” windshield wipers that are programmed to turn on during rainstorms; texts and e-mails that are automatically read aloud to drivers; and five cellphone charging ports as opposed to the single cigarette lighter charger of yesteryear.

Deal activity has been thriving in this attractive subsector over the past year, much of it cross-border. In September, Qualcomm, a wireless technology player with an automotive division, acquired UK-based CSR, which provides automotive software solutions, among other products, for $2.2 billion. And last August, Amphenol acquired Casco Automotive Group, an automotive power outlets and connectivity devices specialist, for $450 million, while a few days later Switzerland-based TE Connectivity bought American Sensor Technologies, which has a segment devoted to automotive pressure sensors, for an undisclosed price.

The need for new technology will persist even as it remains unlikely that overall car sales in 2016 will be significantly higher than sales this year.

In a recently released report, Hampleton Partners has analysed the $14.1 billion of publicly disclosed acquisitions within the Auto Tech sector since March 2012. The findings show that transaction volumes have increased about 40% over that time period. The overall median transaction value was $64 million, with a median EV/S of 2.2x and a median EV/EBITDA of 13.3x. Within the last year alone, some $4.9 billion worth of transactions – at a median transaction value of $115 million – took place.

Although more than half (56%) of the acquired targets were based in North America, 37% came from Europe and 7% from other locations around the globe. For those based in Europe, a slight majority (54%) were acquired regionally by another European based company. In terms of individual countries, the UK saw the most European M&A activity in the Auto Tech space, with a total of 30 acquired targets.

Digital repair specialist Solera was the most active player in the sector, making twelve acquisitions globally in the past three years alone. The second most active buyer was Dealer Track, with six transactions completed worldwide during the past three years.

The report identifies a number of acquirers ‘to watch’ over the months ahead, due to their strategic needs within the automotive technology space. These firms include Bosch, TomTom, Solera and Telogis. Others to watch are financial buyers with an appetite for this sector, including European private equity firms HgCapital, Bowmark Capital and Montagu Private Equity.

 

 

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