Automotive M&A review - Deloitte

Automotive M&A review

Q2 2019

Financial Advisory

Contents

Introduction

03

Highlights

04

Notable transactions

06

Intelligence

08

Statistics

09

Automotive M&A review Q2 2019 | Deloitte Financial Advisory

Introduction

Welcome to the Q2 2019 edition of Deloitte's Automotive M&A review, the latest in a series of quarterly updates that provides an overview of relevant news and transaction activity in the Automotive sector. We hope you enjoy the summary and find it both interesting and informative. If you have any questions, comments or would like to discuss the sector in more detail, please do not hesitate to get in touch. Deloitte Financial Advisory - Industrials

This publication is an easy to digest summary of information sourced from publicly available and third party sources and has not been checked or verified in any way 03

Automotive M&A review Q2 2019 | Deloitte Financial Advisory

Highlights

Global automotive indices were volatile in Q2 2019, and European and North American indices finished the quarter down on Q1, despite some recovery in June. With the exception of Uber's IPO, major transactional activity was muted

European and North American automotive indices were volatile during the quarter and, despite initial gains, ended the period lower (Figure 1). The AsiaPac index followed a comparatively steadier trajectory and was flat over the period. Key themes continue to be sector consolidation, portfolio realignment, new technologies, trading relationships and consumer demand.

Total announced M&A deal value in the period was $8.2bn (Figure 2), down on the previous quarter of $12.4bn. Nonetheless, three deals were recorded with a transaction value over $1bn, including TDR Capital's $2.9bn offer for UK used vehicles marketplace BCA Marketplace. The equity markets enjoyed some recovery in capital issuance, including the much-anticipated IPO of Uber, which raised proceeds of $8.1bn.

Figure 3 provides quarter-on-quarter multiples for a variety of automotive sub-sectors. Trading multiples had a mixed performance in the quarter. Share prices declined very slightly on average across the quarter (less than 1%), with the strongest performing sub-sectors being Automotive Sales (10%) and Aftermarket (12%). Of the OEMs, Ford had a particularly strong quarter (17%) with a significant investment in the electric vehicle space.

Figure 1. Regional automotive index performance1

115 110 105 100

95 90 85 80

Apr-19

Europe

May-19

N.America

AsiaPac

Jun-19

Figure 2. M&A deal value by region & subsector ? Q2 2019

5000

2500 1500

750

0

CY EV/EBITDA (times) $m

Chassis Controls & Electronics Diversified Interiors &

Exteriors Powertrain

Tires Aftermarket Automotive

Sales

Figure 3. Trading multiples2

Europe N.America AsiaPac

14.0

12.0 10.0

8.0 6.0 4.0

8.8x 8.6x 6.7x 6.6x

5.1x 4.0x 4.4x 4.8x

7.2x 6.0x 6.0x 6.3x

5.8x 5.1x 5.1x

4.6x

6.6x

5.8x 4.8x 5.1x

6.2x 5.5x 5.5x 5.7x

11.5x

11.0x

10.4x

10.0x

10.9x 11.0x 10.7x 10.2x

5.6x 5.1x 5.1x 5.3x

2.0

0.0 OEMs

Chassis

Q318 Q418 Q119 Q219

Controls & Electronics

Diversified

Interiors & Exteriors

Powertrain

Tires

Aftermarket

Automotive Sales

Note: The multiples are derived from FactSet without adjustment and are dependent on FactSet's analysis of the constituent companies' financial performance. In the case of OEMs, FactSet may exclude certain financial assets from its calculation of enterprise value, which can lead to high multiples

? STOXX 600 Automobiles & Parts regional indices ? Multiples shown above are the median, current year ("CY") EV/EBITDA multiple for a representative group of companies Source: FactSet, Deloitte analysis

04

Automotive M&A review Q2 2019 | Deloitte Financial Advisory

OEMs The M&A highlight of the quarter was a deal that did not happen. FCA proposed a 33bn all-share merger with Renault which would have seen the combined business ranked third globally in terms of vehicle sales. FCA subsequently withdrew its proposal, stating that "the political conditions in France do not currently exist for such a combination to proceed successfully".

Volkswagen successfully completed the Frankfurt and NASDAQ Stockholm listing of a 11.5% equity stake in Traton, its truck division that includes the Man and Scania brands. The transaction raised approximately $1.7bn for VW and valued Traton at $15.3bn, equivalent to nearly nine times 2018 EBIT.

Tesla, the EV specialist, confirmed many market commentators' expectations and raised $2.35bn via the issue of $750m of equity and $1.6bn of convertible bonds. The funds will be used for "general corporate purposes".

Battery Northvolt, the European battery start-up, undertook a capital raising to help construct the first phase of its battery factory in northern Sweden. When complete, the factory will produce 16 gigawatt hours of lithium-ion batteries per year. Equity funding of $1bn was invested by VW and BMW amongst others. Additional debt capital was provided by the European Investment Bank ($400m) and other lenders. In addition, Northvolt established a joint venture with VW to develop a 16GWh battery cell gigafactory in Lower Saxony, Germany.

Daimler invested $100m for a 10 per cent equity stake in Sila Nanotechnologies, a Californian battery materials start-up. Sila, which raised a total of $170m, focuses on chemistries that enable higher energy densities and claims that its materials can improve the density of batteries by 20 per cent. Its products have applications in a variety of end markets including electric vehicles.

Automotive sales BCA Marketplace, the UK used vehicles marketplace, received an offer from private equity operator TDR Capital that values BCA's equity at $2.4bn. The enterprise value under the offer equates to circa 12.5 times BCA's reported adjusted EBITDA.

UK car dealership Pendragon undertook an operational & financial review following poor trading, particularly in its used car division, and operational issues. The business subsequently disposed of two US JLR dealerships to Lithia Motors for $77m and will provide a strategic update to investors in Q3.

Telematics The theme of tire OEMs investing in the telematics sector continued, with Michelin announcing the acquisition of Masternaut, a leading European telematics provider. Masternaut operates primarily in France and the UK and manages over 220,000 mostly light utility vehicles under contract. Michelin cited benefits such as the accelerated development of its Services & Solutions business for light vehicles, the potential for geographical expansion and the increased volume of data capture enabling greater services. Consideration was stated as eight times 2018 EBITDA.

Autonomous driving Apple acquired autonomous driving startup Drive.ai. Terms have not been disclosed although reports suggested consideration would be less than the $77m raised in venture capital to date.

Renault, Nissan and Mitsuibishi have agreed to partner with Waymo, Alphabet's autonomous vehicle unit, to explore driverless mobility services. The partnership will involve establishing "alliancefocused" joint venture companies in France and Japan.

Ford agreed to invest $500m in Rivian, an EV start-up that has developed its own battery pick-up truck. Amazon is an existing investor in the venture.

Brakes The Dutch braking systems manufacturer, Chassis Brakes International, which was put up for sale by KPS Capital in January 2019, was sold to Hitachi Automotive Systems. Terms were not disclosed, although KPS reportedly made a six times return on its investment. CBI was established by KPS in 2012 to acquire the automotive foundation brakes business of Robert Bosch.

Controls & Electronics Veoneer, the Swedish safety systems specialist, raised $600m in equity and convertible loan notes for working capital purposes following weak trading.

TuSimple, a San Diego based autonomous truck company closed a $200m Series D financing. TuSimple is undertaking a mail delivery trial for the US Postal Service between Phoenix and Dallas.

Ride-hailing Uber become the second ride-hailing company to publicly list its shares, following in the footsteps of Lyft's Q1 IPO. The business raised $8.1bn in new capital at a valuation of $82bn, pricing at the bottom end of its reported price range. At the end of the quarter, Uber's shares were trading marginally below their issue price.

Source: Company announcements, press 05

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