Chinese ”“ and Asian -companies, looking to improve their competitive standing, are stepping up their role in the consolidation of the global auto industry, according to a report by consultants PricewaterhouseCoopers.
The study ”“ Automotive M&A Insights: Driving Value ”“ found that in 2011 there were 594 mergers, takeovers or partial acquisitions in the auto industry worldwide with a total combined value of 45 billion dlrs. That compares with 520 deals with a value of 25 billion euros in 2010.
Asian investors accounted for 31 pc of the global M&A volume last year, equivalent to 14 billion dlrs last year.
According to the study, Asian companies made 3.3 billion dlrs of acquisitions in other parts of the world, while European and North American companies invested 3.3 billion and 1.3 billion dlrs, respectively, outside their home regions.
“China’s auto industry is strongly pushing westwards,” said PwC partner Martin Schwarzer.“We expect this development to continue in coming years, because the Chinese industry has recognized corporate acquisitions as a way to accelerate growth.”
Moreover, China has designated the auto industry as crucial to the country’s economy and it has made no secret of its desire to not leave the domestic market to foreign carmakers.
PwC said Chinese interest is focused on companies that are well positioned in established industrial countries and on suppliers with strong technologies. Especially small and mid-sized companies, which make up the bulk of the German automotive supplier industry fit well into the Chinese m&a focus.
In Europe, there are three prominent examples of recent big Chinese automotive acquisitions. In 2010, Geely bought Sweden’s Volvo from Ford Motor. In 2011, China’s Hebei Lingyun Industrial acquired Germany’s Kiekert, the world’s largest maker of automotive locking systems. And also in 2011, Beijing Hainachuan Automotive Parts acquired Dutch roof systems maker Inalfa.
Schwarzer said recent acquisitions in Germany could mark the beginning of a wave of consolidation. As more German technology is acquired by Chinese companies and subsequently sold in the big Chinese market, this may intensify price pressures.
“That would make more suppliers candidates for a takeover,” Schwarzer said.
Globally, the auto industry will also see more m&a activity, PwC predicts. It cited three reasons: Global car demand is expected to rise "significantly;" there are more strategic buyers around who have the financial resources to execute deals; and the financial buyer community is ready to spend uninvested capital.
A copy of the PwC report can be downloaded here.