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Automotive capital confidence barometer - Mergers and acquisitions outlook - EY - Global

Automotive capital confidence barometer

Mergers and acquisitions outlook

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What is the primary reason for not pursuing an acquisition inthe next 12 months?

Automotive capital confidence barometer - Mergers and acquisitions outlook
63% of automotive respondents acknowledge focusing on core assets as the main driver of divestment activity.

The M&A market continues to be restrained by conservatism.

Appetite for M&A varies by region

Twenty-two percent of global automotive respondents stated they plan to pursue acquisitions in the next 12 months, compared with 39% in October 2011, although regional variances exist.

Forty percent of respondents in North America, 32% of respondents in Western Europe and only 7% of respondents in Asia-Pacific are planning to pursue acquisitions in the next 12 months. This disparity amongst responses highlights the impact that certain events (e.g., the Eurozone crisis, Thailand floods, etc.) can have on the regions in which they occur.

Do you expect your company to pursue acquisitions in the next 12 months?

Automotive capital confidence barometer - Mergers and acquisitions outlook

Deal execution and integration capabilities along with valuation gap deter pursuit of acquisitions

Respondents from North America (40%) and Western Europe (36%) indicated deal execution and integration capabilities as the primary reason not to pursue acquisitions. Respondents from Asia-Pacific (59%) indicated valuation gap (whether real or perceived) as the primary reason for not pursuing acquisitions.

Deal-making fundamentals improve

Automotive M&A fundamentals are becoming more favorable. While respondents believe the number of deal opportunities is decreasing, confidence in the quality of the potential targets and the likelihood of closing deals has increased over the last six months.

Emerging markets remain attractive investment destinations

Automotive companies are in continual pursuit of emerging market investment opportunities. Accordingly, there is a desire to balance portfolios between emerging and developed markets to better position for growth and profitability.

The top three most attractive automotive investment destinations are emerging markets — China (1), India (2) and Brazil (3). BRIC markets remain the most attractive due to their high growth potential, driven by expanding domestic demand.

Divesting shifts from contingency to core strategy

In contrast to acquisition activity, 25% of respondents expect to make a divestment over the next 12 months. Thirty-three percent of North America, 34% of Western Europe and 15% of Asia-Pacific respondents expect to make a divestment over the next 12 months.

For all regions, the percentage likely to sell assets over this period has continued to rise, from 16% to 25%, over the past 18 months. Companies are continuing to pursue carve-outs and divestments as well as strategic repositioning of core technologies to drive future value.

Is your company likely to make an asset sale/divestment in the next 12 months?

Automotive capital confidence barometer - Mergers and acquisitions outlook



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