May 2015 | 11th edition
Automotive Capital Confidence Barometer
Anticipation of transactions has never been higher in the automotive sector
Our most recent Capital Confidence Barometer survey finds 70% of survey respondents expecting to pursue acquisitions in the next 12 months. In the six years we have conducted our survey, we have not experienced such a high level of anticipation.
The automotive sector continues to experience positive trends in most established markets, including positive sentiment throughout the Eurozone around, albeit slow, growth. Growth expectations in China, India and other leading emerging markets have been adjusted but are still positioned to exceed those in mature markets.
This Barometer finds a heavy weighting toward middle market transactions — those with a value of up to US$250m. There is also a significant focus on increasing investments in new products and expanding the mix of existing products and services. Cost reduction and operational efficiencies continue to weigh heavily on investment decisions. Geographic expansion is no longer a key driver to transaction strategies.
Our survey indicates that political stability is a continuing and primary concern regarding strategy. Of particular interest is the growing concern regarding cybersecurity and possible threats relating to strategy, transaction executions and reputational damage.
Overall, we believe the increased interest in acquisitions will especially benefit automotive companies that have evaluated the long-term strategic fit of portfolio businesses and are making preparations to divest non-core or nonstrategic operations.
Macroeconomic environment: An overwhelmingly positive outlook for the global economy and a continued robust outlook for corporate earnings and other leading market indicators, including credit availability, should combine to support a healthy M&A environment over the next 12 months.
Corporate strategy: Cost reduction continues as a perennial focus. But in a fast-changing world, automotive companies are pursuing innovative growth strategies to improve their market positioning.
M&A outlook: Continued optimism in the automotive sector — brought about by increasing sales in both developed and emerging markets and a sector-wide drive to decrease costs and improve efficiencies — is motivating increased M&A. A significant number of deals focus on acquiring emergent technologies, such as driverless cars and advanced materials.
About this survey
The Global Capital Confidence Barometer gauges corporate confidence in the economic outlook and identifies boardroom trends and practices in the way companies manage their Capital Agendas — EY's framework for strategically managing capital.
It is a regular survey of senior executives from large companies around the world, conducted by the Economist Intelligence Unit (EIU). Our panel comprises select global EY clients and contacts and regular EIU contributors.
In February and March, we surveyed a panel of more than 1,600 executives in 54 countries. More than half were CEOs, CFOs or other C-level executives.
Of the automotive sector companies represented in this survey:
- 26% have revenues greater than US$5b
- 41% have revenues between US$1b–US$4.9b
- 20% have revenues between US$500m–US$999.9m
- 13% have revenues less than US$500m
- 64% are publicly listed
- 33% are privately owned