Market conditions have shifted M&A strategies but not overall deal volume, according to an automotive aftermarket industry report released by the Automotive investment banking team at Brown Gibbons Lang & Company (BGL).
Inside the report, BGL shares its annual recap from the 2022 SEMA Show, examining developments that are impacting M&A strategies in the automotive aftermarket.
Major automotive M&A themes influencing deal activity in the current environment include:
- Economic uncertainty has shifted consumer spending away from new cars while maintenance of existing vehicles has increased, steering purchases toward DIY and DIFM products and non-discretionary services such as mechanical and collision repair. As a result, M&A transactions involving suppliers of replacement parts and repair equipment have seen an uptick in activity.
- Supply chain challenges have abated but not entirely, leading some companies to rethink reshoring or near-shoring of production. However, companies with domestic production remain attractive targets for M&A. Vertical integration strategies are also being advanced through acquisitions.
- Electrification is no longer an “if” but a “when” question as major automakers announce significant investments to accelerate adoption of electric vehicles (EVs), with EVs expected to eventually represent a large part of the car parc. Aftermarket companies that specialize in powertrain-related components must also have an eye to the future. Suppliers of powertrain parts have resorted to M&A to add capabilities that insulate themselves from obsolescence. Private equity has also been on the hunt for powertrain-related businesses with such plans.
- American buyers love their trucks and SUVs, and vehicle market share has shifted as evolving preferences impact consumer buying behavior. Companies making aftermarket performance and appearance-enhancing products for trucks and SUVs continue to be attractive areas for consolidation.