Technology driven M&A in the automotive industry - From automobile to autonomous EY Study | October 2018
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Technology driven M&A in the automotive industry From automobile to autonomous EY Study | October 2018
Contents 1. Key messages........................................................................................ 3 2. Context for this study...................................................................... 4 3. Deal development at a glance................................................... 6 4. Technology deals in automotive.............................................. 8 5. OEMs and supplier compared.............................................. 12 6. International M&A.......................................................................... 14 7. Appendix............................................................................................... 16 Methodology & Authors.............................................................................. 22
1 Key messages 1 2 3 4 5 Technology Core Automotive Automotive M&A M&A technologies OEMs suppliers in Germany The rapid technological changes Core technologies that drive Automotive OEMs shift their Automotive suppliers remain German companies show a bring the automotive industry tech-deals evolve around the attention to revenue creation and focused on product innovation particular appetite for technologies at the verge of a strategic crisis, electrification of Powertrain, use M&A to reinvent themselves and move up the value chain to for Mobility as a Service, despite record sales. Companies Autonomous Driving capabilities, as Mobility as a Service providers challenge the space typically Connectivity and Autonomous move to M&A to rapidly adapt their and Connectivity. In particular, with shared vehicle capabilities. occupied by OEMs. The fight Driving capabilities, while portfolios and proactively react Software Applications play an over the supremacy of core acquisitions for Powertrain to the changing environment. increasing role in M&A deal technologies in Powertrain and technologies decrease. activity. Hardware deals revolve Autonomous Driving technologies As a result, technology driven around Power Electronics intensifies. As a leader in the global M&A plays an increasing role in and sensors. automotive industry, Germany the automotive industry, and has more outbound M&A activity increased by 60% since 2015. Innovative processing and than inbound. manufacturing technologies such as 3D Printing play no role in automotive M&A deals. Technology driven M&A in the automotive industry From automobile to autonomous | 3
2 Context for this study As industries are converging, automotive firms turn to M&A to keep pace with technological change The automotive industry at the verge of a revolution Technological trends in the automotive industry The automotive industry is undergoing unprecedented Despite record sales, the automotive industry is at the Digitalization is transforming entire businesses, from changes on multiple fronts, from socio-political verge of a strategic crisis, with new technologies being internal processes over product capabilities to unexploited pressure for a low-carbon footprint, over changing introduced every year, and incumbent firms lose value streams. EY has identified three key areas impacted customer demands from multi-purpose vehicles to ground in core competencies of the future. For the first by technological advances in the automotive industry: diverse mobility offerings, to radical product time, technological core competencies were not innovations enabled by breakthroughs in basic developed in-house, but brought in by new entrants 1. Technologies related to processes technologies previously not available. that lead the way to the digitalization of core (‘Process technologies’): components. In this environment, M&A becomes a key • New technologies can drive efficiency in the processes To succeed in this environment, players at every level vehicle to defend the market position in the future. of the company, such as manufacturing processes of the value chain — from component suppliers to • Key processing technologies in the automotive industry commercial or light vehicle manufacturers to retailers This study looks at technological driven M&A activity in include Industry 4.0, 3D Printing, Smart Supply Chain — have to review their product portfolio and adapt to the automotive industry from 2015 to 2017. Management, and Clean Production the changing needs in the automotive value chain. 2. Technologies impacting the final product Current situation in the business life cycle (‘Product technologies’): 1 2 3 4 • Technologies that are applicable and planned for the final Introduction Growth Maturity Decline product of the company, i.e. technologies that are applied to the vehicles. Such technologies can revolve around Indicators Indicators Status Quo2017 • From idea to • Growing market hardware, but are increasingly driven by software Strategic Crisis business success 3 • Key product innovations include new Powertrain • Searching for • Increasing sales product market • Reducing costs technologies, Connectivity, and Autonomous Driving fit • Some profits • Low sales Indicators Indicators Operational Crisis • High costs • Product offerings • Misaligned strategy 3. Technologies aimed at revenue improvements 3 • No profits fit demand • Introduction of new (‘Revenue stream technologies’): • Stable sales technologies • Cost efficiency • Loss of core • New technologies that are used to generate additional • Increasing profits competences in the revenue, in particular by exploiting new sales channels industry and entry Indicators of new competitors • Decline in • Revenue improving technologies include E-Commerce revenueand profits Financial Crisis • Changing customer 3 for the sale of vehicles and parts, focused dealership demands/ • Operating loss introduction of new strategies for electronic vehicles, and new offerings Sales customer segments for Mobility as a Service (MaaS) Time 4 | Technology driven M&A in the automotive industry From automobile to autonomous
“ The battle for disruptive technologies is red hot. Established automotive players are fighting for the lead in key future technologies, worrying that new entrants from the digital space will inject themselves between today’s players and their customers. Upcoming technology leaders will leverage their capabilities to gain a footing in the industry. M&A is mission critical for the incumbent players to conquer and retain that space, protecting current revenues and opening up new business models. Dr. Marc Förstemann EY Partner, GSA Transportation Transaction Advisory Leader ” Technology driven M&A in the automotive industry From automobile to autonomous | 5
3 Deal development at a glance Number of technology investments increased by 60% since 2015 — deal values declined by 38% in the same period Evolution of Technology Automotive Investments Degree of Investment Degree of Investment 2015 2016 2017 1,400 100% 93% 100% ∑ 1,238 91% ∑ 1,231 ∑ 1,212 89% 1,200 82 131 Majority 104 33 36 47 Investment Share of Investment Degree 80% 80% 72% Number of Investments 69% Share of Investments 1,000 59% 60% 60% Minority 800 15 25 18 Investment 41% 600 1,149 1,108 1,107 40% 40% 31% 28% Undisclosed/Unknown 400 34 43 66 Deal Value 20% 20% 200 11% 7% 9% Total 82 104 131 0 0% 0% 2015 2016 2017 2015 2016 2017 2015 2016 2017 Non-tech investments Tech investments Majority Investment (>50% of Shares) Majority Investment (
3 Deal development at a glance In 2017, technology driven deals are centered around powertrain, autonomous driving and connectivity Type of Technology Powertrain 36 (28%) 21 (16%) 140 ∑ 131 Autonomous Driving 16 (12%) Connectivity 120 ∑ 104 Others 100 14 Number of deals ∑ 82 Technology Mobility as a Service/9 (7%) 80 13 Industry 4.0/8 (6%) 107 driven M&A deals (82%) 60 Sales/4 (3%) 81 32 (24%) in 2017 67 40 Product Architecture/4 (3%) Vehicles/3 (2%) 20 After Sales/3 (2%) 2 9 8 (6%) 0 2015 2016 2017 Flying Vehicles/1 (1%) Process Product Revenue Stream 42 (32%) ∑ 131 Technology driven M&A deals in 2017 Commentary • In 2017, key technologies targeted via M&A included: • Powertrain, with 42 deals (32%) • Autonomous Driving, with 36 deals (28%) • Connectivity, with 21 deals (16%) • Other, with 32 deals, including Mobility as a Service technologies for revenue improvement and Industry 4.0 to increase manufacturing process efficiency • Product-related technologies are again in the focus of automotive firms: With 82% of all deals being centered around technologies to optimize the automobile as the core ‘product’, process-focused technologies as well as technologies to explore and develop additional revenue streams (e.g. car sharing concepts and applications) account for the minority of deals with 6% and 12% respectively Technology driven M&A in the automotive industry From automobile to autonomous | 7
4 Technology deals in automotive The number of deals made for product technologies is steadily increasing — driven by autonomous driving, powertrain and connectivity Number of deals in Product technologies 1. Powertrain ∑ 27 ∑ 38 ∑ 42 ∑ 67 ∑ 81 ∑ 107 120 50 • The steep increase of deals aimed at acquiring 40 3 technologies for electric vehicles in 2016 was followed 2 5 Hybrid technologies 5 3 3 30 2 Fuel economy/emissions by another strong year with 31 deals in 2017 4 8 • Alternative technologies for zero emission powertrains, 2% 100 Fuel cell +3 20 1 29 31 Electric vehicles like fuel cell technology, is overall small but shows steady 10 18 growth, as companies keep options open 80 1% 5 42 +2 0 2015 2016 2017 5 2 60 38 1 27 2. Connectivity 21 40 ∑ 21 ∑ 14 ∑ 21 1 14 Telecommunications • After a weak year in 2016, deal activity for technologies 25 Software (apps, OS and in relation to Connectivity of vehicles rebounds in 2017 21 4 20 36 20 5 3 cyber sec.) • In particular deals for software applications have 1 20 Smart city increased from just 2 in 2016 to 7 in 2018 15 7 10 6 6 Entertainment • For the first time, technologies connecting vehicles to 0 10 3 2015 2016 2017 6 2 Electrification the Smart City play a role, with a total of 3 deals 5 5 3 5 2 Control systems Vehicles Connectivity 1 1 1 Product Architecture Big Data 0 2015 2016 2017 Augmented reality Powertrain Autonomous Driving Flying Vehicles 3. Autonomous Driving • Most deals are made for Powertrain related technologies, ∑ 10 ∑ 20 ∑ 36 with Autonomous Driving in the heals, and Connectivity 40 Steering systems • Autonomous Driving has sparked the interest of investors catching up to 2015 numbers after a drop in 2016 32 Sensors and cameras in 2017, with a staggering total of 36 deals made for 12 24 Semiconductors technologies related to Autonomous Driving, up from 6 Navigation only 10 deals in 2015 and 20 in 2016 16 1 8 6 1 2 Lights • Sensors and cameras lead the way in M&A activity for 8 1 3 5 2 4 2 Control systems Autonomous Driving technology, with 12 deals in 2017 5 3 4 0 2015 2016 2017 Artificial intelligence 8 | Technology driven M&A in the automotive industry From automobile to autonomous
4 Technology deals in automotive Investments targeting revenue improvements are focused on new retail channels like Mobility as a Service Number of deals related to Revenue 1. Mobility as a Service 18 12 ∑ 10 • The technological portfolio for moving to mobility service ∑9 Vehicles rental 9 2 provider is diverse, with acquisitions made to advance ∑ 16 2 16 1 Taxi service provider rental services, taxi services, shared vehicle services and % +14 6 ∑4 Shared vehicles ∑ 14 1 7 customer apps 14 +8% 4 3 1 6 Apps ∑ 13 2 • Overall, deals still concentrated on shared vehicle 1 3 0 providers in 2017, with a minor decrease from 7 to 6 deals 12 2015 2016 2017 4 • Somewhat surprisingly, stand-alone deals made for apps 10 aimed at mobility services do not play a significant role in the move of the automotive industry from manufacturing 8 9 to service providers 4 6 10 4 2. Sales 5 2 3 12 • Investments were made to advance technologies for 1 9 Used vehicles classic distribution channels via retailers, to open new 0 2015 2016 2017 Focused on electric channels in E-Commerce, and in particular to move into 6 ∑4 ∑4 vehicles After Sales 1 ∑3 providing Mobility as a Service 3 1 1 3 E-commerce Mobility as a Service 2 2 • In 2017, the focus on E-Commerce channels shifted to 1 Sales 0 2015 2016 2017 the sale of used vehicles, with a total of 3 deals • Investments made into technologies to improve sales 3. After Sales are steadily increasing • While 2015 saw an equal distribution between 12 • For After Sales, deals to acquire technologies focus technologies aimed at vehicle sales, parts sales and the 9 Parts ordering on remote diagnostics for users and technicians. new channel of mobility services, the focus shifted to 6 ∑5 E-commerce This technology can help in the development of 1 ∑3 deals aimed at providing Mobility as a Service as a new 1 1 Diagnostics autonomous vehicles, for which remote diagnostics 3 channel for sales ∑1 plays a key role for efficient maintenance 3 2 1 0 2015 2016 2017 Technology driven M&A in the automotive industry From automobile to autonomous | 9
4 Technology deals in automotive Industry 4.0 dominates the technology driven deals in advancement of manufacturing and processing techniques Number of deals in Processing Technologies Main technologies within the Industry 4.0 deals 10 10 ∑9 −33% 1 ∑8 ∑8 8 8 1 3% 1 +3 ∑6 Robotics % 6 6 50 1 Electronics +3 4 Software IoIT % 00 4 6 8 4 +2 3 Big Data ∑2 ∑2 2 2 2 1 1 2 1 1 1 1 0 0 2015 2016 2017 2015 2016 2017 Clean production Smart Supply Chain Industry 4.0 3D Printing Commentary • Overall, investments made to advance processing technologies are still high with 8 deals, down from 9 in 2016 but up from only 2 in 2015 • The technologies driving the Industry 4.0 related deals are diverse, from Electronics • The deals are driven by an interest in Industry 4.0 technologies, which hardware, over Software, to Internet of Industrial Things (IoIT), Robotics and Big Data shows a steady increase since 2015 and is up two deals since 2016 • In 2017, Electronics Hardware played a larger role for Industry 4.0 related deals • While in 2016 three deals aimed at reducing emissions, smart supply chain for the first time management and 3D Printing, all deals in 2017 focused on Industry 4.0 • Big Data storage, handling and mining still plays only a minor role, with only 1 deal in • New manufacturing techniques such as 3D Printing play no role in the 2016 and 0 deals made in 2015 and 2017 technology driven M&A deals in 2017 • Overall, the number of investments made for Industry 4.0 software, in particular smart control software, decreased from 3 deals to 2 from 2016 to 2017 10 | Technology driven M&A in the automotive industry From automobile to autonomous
“ With rapid technological changes in the market, firms need to review their portfolios and rethink their business models. While OEMs reinvent themselves as service providers, suppliers attack to fight for a leading position as providers of core future technologies. Constantin M. Gall EY Partner, GSA Automotive and Transportation Transaction Advisory Leader ” Technology driven M&A in the automotive industry From automobile to autonomous | 11
5 OEMs and supplier compared Automotive suppliers remain focused on product innovation, while OEMs increasingly shift attention to technologies for revenue creation Type of Acquirer 100% • In 2017, automotive suppliers closed 110 technology deals — 5x more investments than made by OEMs (21 deals) +31% 110 • After a strong year of 2016 for OEMs, suppliers came back and increased their share of 80% +14% technology driven M&A activities from 81% to 84% in 2017 Number of Investments 84 74 • Despite the decrease in percentage, OEMs’ deal level remained stable and actually 81% 84% 60% 90% Supplier increased in absolute terms, with 5% growth in number of deals OEM 40% +5% +150% 20 21 20% 8 19% 16% 10% 0 2015 2016 2017 Technology Investments per Type of Acquirer ∑ • The majority of deals done by OEMs still reverts around product related technologies, 6% 7 Revenue Stream 7% 6 with 57% in 2017 14% 10 • However, the focus of technology M&A activities steadily shifts towards revenue stream: Supplier 86% 95 Product 82% 69 Nearly every second deal in 2017 (43%) is linked to future revenue streams (e.g. ‘Mobility as 83% 62 a Service’ or sales technologies). At the same time, product-related investments are 8% 8 Process 11% 9 gradually decreasing from 62% in 2015 to 57% in 2017 3% 2 • Automotive suppliers have an even stronger focus on investments to product-related 43% 9 Revenue Stream 40% 8 technologies, as deals account for 83%, 82% and 86% in years 2015–17 38% 3 • In contrast to OEMs, suppliers invest in process-related technologies: In 2017, 8% of all deals OEM 57% 12 Product 60% 12 were related to process technologies. In addition, suppliers constantly invest less in revenue 62% 5 stream technologies with a declining share of 14% to 6% of all investments in 2015–17 0% 20% 40% 60% 80% 100% 2017 2016 2015 12 | Technology driven M&A in the automotive industry From automobile to autonomous
5 OEMs and supplier compared OEMs invest in mobility as a service and sales technologies whereas suppliers lead in investments in powertrain and autonomous driving Invested Technologies per Acquirer (in % of total OEM/supplier deals, 2017) 50% 1 2 3 40% 35% 29% 29% 30% 19% 19% 20% 14% 15% 14% 10% 7% 4% 5% 3% 3% 3% 0% 0% 0% 0% 1% 0% 0 Industry 4.0 Powertrain Autonomous Connectivity Product Vehicle Flying Vehicles Mobility as a Sales After Sales Driving Architecture Service Process Product Revenue Stream Supplier OEM Commentary EY Point of View • In 2017 technology driven M&A activities, a strong shift in investment and development focus by both OEMs and suppliers became apparent: • OEMs center their technology driven M&A efforts on exploring new 1 OEMs do not invest in Industry 4.0 technologies, but leave the field to automotive revenue streams by investing in Mobility as a Service and sales-related suppliers with investments accounting for 7% of total deals technologies instead of focusing on product development, which is at 2 In addition, suppliers attack OEMs in their core fields of product development and the core of their traditional DNA innovation: Investments in Powertrain and Autonomous Driving technologies represent • Suppliers react quickly and shift their attention to Powertrain and 35% and 29% of all deals Autonomous Driving technologies, filling the investment 3 At the same time, OEMs focus to unlock new revenue streams with 29% and 14% of all gap and thereby attacking OEMs in investments made in Mobility as a Service and sales-related technologies respectively. their core competencies However, no M&A activities by OEMs in relation to after-sales technologies were recorded • Besides, one notable technology investment in flying vehicles by OEMs was made in 2017 (5%) Technology driven M&A in the automotive industry From automobile to autonomous | 13
6 International M&A In Europe 2017, the most active countries France, United Kingdom and Germany are net acquirers — South Korea, Israel and USA are net sellers Top 10 most overall M&A in 2017 (# of deals) Sold ∑ 5 Bought ∑ 8 Sold ∑ 6 Bought ∑ 10 Sold ∑ 11 Bought ∑ 16 Sold ∑ 31 Bought ∑ 35 Product archit. Auto Driving Connectivity Powertrain Powertrain MaaS Powertrain Powertrain 1 China................................................................... 694 2 deals (40%) 3 deals (38%) 2 deals (33%) 3 deals (30%) 3 deals (27%) 6 deals (38%) 16 deals (52%) 20 deals (57%) 2 United States................................................. 690 Powertrain Connectivity Sales Connectivity MaaS Connectivity Connectivity Connectivity 1 deal (20%) 2 deals (25%) 1 deal (17%) 3 deals (30%) 2 deals (18%) 3 deals (19%) 6 deals (19%) 6 deals (17%) 3 Japan................................................................. 254 After Sales Powertrain Powertrain Auto Driving Connectivity Auto Driving Auto Driving Auto Driving 4 South Korea................................................... 220 1 deal (20%) 1 deal (13%) 1 deal (17%) 2 deals (20%) 2 deals (18%) 3 deals (19%) 4 deals (13%) 4 deals (11%) 5 France................................................................ 202 Auto Driving Product archit. Auto Driving Sales Sales Powertrain Vehicle Vehicle 1 deal (20%) 1 deal (13%) 1 deal (17%) 1 deal (10%) 2 deals (18%) 2 deals (13%) 2 deals (6%) 2 deals (6%) 6 Germany........................................................... 193 MaaS MaaS Industry 4.0 Auto Driving Sales Industry 4.0 Industry 4.0 7 Russian Fed.................................................... 138 1 deal (13%) 1 deal (17%) 1 deal (10%) 1 deal (9%) 1 deal (6%) 2 deals (6%) 1 deal (3%) 8 United Kingdom........................................... 133 Buyer in 62% of deals Buyer in 63% of deals Buyer in 59% of deals Buyer in 53% of deals 9 Unknown........................................................... 129 10 India.................................................................... 102 Sold ∑ 29 Bought ∑ 23 Top 10 technology investments in Auto Driving 9 deals (31%) Auto Driving 11 deals (48%) 2017 (# of deals) Powertrain Powertrain 8 deals (28%) 6 deals (26%) Sold ∑ 4 Sold ∑ 9 Bought ∑ 8 Sold ∑ 5 Bought ∑ 7 Connectivity Connectivity Auto Driving Auto Driving Auto Driving Auto Driving Auto Driving 1 China...................................................................... 35 4 deals (14%) 2 deals (9%) 3 deals (75%) 5 deals (56%) 5 deals (63%) 2 deals (40%) 4 deals (57%) 2 United States.................................................... 23 MaaS After Sales Seller in all deals Powertrain Powertrain Connectivity Connectivity 3 deals (10%) 2 deals (9%) 3 deals (33%) 2 deals (25%) 2 deals (40%) 2 deals (29%) 3 Germany.............................................................. 16 After Sales Vehicle Connectivity Connectivity Powertrain Powertrain 4 France................................................................... 10 2 deals (7%) 1 deal (4%) 1 deal (11%) 1 deal (13%) 1 deal (27%) 1 deal (14%) 5–6 South Korea......................................................... 8 Seller in 56% of deals Buyer in 53% of deals Buyer in 58% of deals 5–6 United Kingdom................................................. 8 7 Japan....................................................................... 7 8 Sweden.................................................................... 3 Commentary 9–10 Hong Kong............................................................. 2 9–10 South Africa......................................................... 2 • 5 of the top 7 most active nations were net buyers in 2017 9–10 Switzerland........................................................... 2 • German companies sold primarily Powertrain businesses and invested in 9–10 Canada.................................................................... 2 service-oriented and software-based products and solutions 9–10 Unknown................................................................. 2 • As a country, Israel was the most significant net seller, with a distinct 9–10 Italy........................................................................... 2 emphasis on companies related to Autonomous Driving 9–10 Luxembourg......................................................... 2 14 | Technology driven M&A in the automotive industry From automobile to autonomous
6 International M&A In international M&A, Germany is a net acquirer with a strong focus on mobility as a service providers # deals Target technology 1 Powertrain Outbound M&A from Germany to target country in 2017 # deals Target technology 1 Autonomous Driving # deals Target technology 1 Autonomous Driving # deals Target technology 1 Mobility as a Service # deals Target technology 2 Mobility as a Service # deals Target technology 1 Connectivity # deals Target technology 1 Mobility as a Service # deals Target technology 1 Powertrain Commentary # Bought ∑ 9 # Sold ∑ 4 • In 2017, Germany was a net acquirer with a total of 9 outbound international 4 Mobility as a Service 2 Powertrain deals vis-à-vis 4 inbound deals 2 Connectivity 1 Connectivity 2 Autonomous Driving 1 Industry 4.0 • No particular focus region has been identified, as the target countries 1 Powertrain show a wide spread • The majority of deals target Mobility as a Service technologies, followed by Connectivity and Autonomous Driving Technology driven M&A in the automotive industry From automobile to autonomous | 15
Appendix 16 | Technology driven M&A in the automotive industry From automobile to autonomous
7 Appendix/Automotive M&A in 2017 A search for Autonomous Driving technology is driving M&A activities in 2017, as deals for Connectivity technologies rebounds Number of deals related to Autonomous Driving technologies Number of deals related to Connectivity technologies 50 25 ∑ 21 ∑ 21 Telecommunications Steering systems 40 20 3 (14%) ∑ 36 5 Software −3 1 (3%) % Sensors and cameras 3% 0 +5 (Apps, OS, cyber sec.) Semiconductors 30 15 ∑ 14 7 (33%) % 12 (33%) 0 Smart city +8 6 Navigation Entertainment ∑ 20 6 Lights 20 6 (17%) 10 3 (14%) Electrification 8 % Control systems 00 6 (17%) Control systems 6 2 +1 ∑ 10 2 5 (24%) Artificial intelligence 10 1 5 1 3 5 (14%) Augemented reality 1 5 2 4 2 (6%) 3 2 (10%) 5 4 (11%) 3 1 1 1 (5%) 0 0 2015 2016 2017 2015 2016 2017 Commentary Commentary • Several technologies drove the increase in M&A activities for Autonomous Driving: • After a weak year in 2016, deal activity for technologies in relation to Connectivity of Vehicles • Sensors and cameras lead the way in M&A activity for Autonomous Driving technology, rebounds in 2017 with 12 deals in 2017 • In particular deals for software applications have increased from just 2 in 2016 to 7 in 2017 • A new interest in smart lighting systems arose in 2017, as lighting systems develop • New technologies that appeared for the first time in 2017 are: to become a key technology in support of sensors • Technologies connecting vehicles to the smart city, with a total of 3 deals • The strongest increase in deals involved semiconductors, from 2 deals recorded • Augmented reality technologies, with 1 deal in 2017 in 2016 to 6 deals in 2017 • Entertainment systems, which were robust through the year 2016, appear stable for 2017 • Navigation systems increased from 3 to 6 deals • General telecommunications technologies decreased from 6 deals in 2016 to just 3 in 2017 • Deals for Artificial Intelligence (A.I.) technology remains stable and robust, with 4 deals in 2017 Technology driven M&A in the automotive industry From automobile to autonomous | 17
7 Appendix/Automotive M&A in 2017 Deals aimed at acquiring technologies for electric vehicles surge, as fuel economy and efficiency of contemporary engines fade out Number of deals related to Powertrain technologies Number of deals for key Powertrain technologies 50 50 ∑ 42 1% 3 40 ∑ 38 +1 40 2 Transmissions 5 1% 5 Power electronics 3 ∑ 31 +4 Hybrid technologies ∑ 29 +7% 30 2 30 Electrification ∑ 27 Fuel economy/emissions 8 12 Cooling 1% +6 Fuel cell 8 Control systems 20 20 ∑ 18 4 Electric Vehicles 1 1 3 31 2 1 Battery charging 29 6 1 5 2 Battery 10 10 18 5 12 10 5 0 0 2015 2016 2017 2015 2016 2017 Commentary Commentary • The steep increase of deals aimed at acquiring technologies for Electric • Within the Electronic Vehicle technology sector, two core technologies play a particular role: Vehicles in 2016 was followed by another strong year with 31 deals in 2017 • Battery technologies are still highly sought after, with 12 deals in 2017 • Alternative technologies for zero emission Powertrains, like Fuel Cell • Power electronics, including Electronic Engines, caught up with Battery technology with technology, is overall small but shows steady growth, as companies keep equally 12 deals in 2017 options open • Interestingly, acquisitions for Battery Charging infrastructure decreased from 5 in 2016 to • Deals aimed at Hybrid technologies are still increasing from 2 in 2016 only 2 deals in 2017, despite the move from Hybrid to Electric Vehicles to 3 in 2017, despite the strong deal-flow associated with Electric Vehicles technologies 18 | Technology driven M&A in the automotive industry From automobile to autonomous
7 Appendix/OEMs and suppliers compared Automotive suppliers dominate acquisitions of key technologies for powertrain and autonomous driving and lead in industry 4.0 Invested Technologies — Details (Number of deals, 2017) ∑ 31 30 Automotive Supplier OEM 20 28 ∑ 12 10 ∑7 ∑6 ∑6 ∑6 ∑5 ∑5 12 ∑5 ∑4 2 ∑4 ∑3 ∑3 4 ∑3 5 ∑3 ∑3 ∑3 ∑2 5 ∑2 4 ∑2 ∑2 ∑2 5 3 5 ∑1 ∑1 2 ∑1 1 4 ∑1 ∑1 ∑1 1 ∑1 ∑1 ∑1 ∑1 ∑1 ∑1 3 3 3 3 4 3 1 2 1 2 1 1 2 1 2 1 1 1 1 2 1 2 1 1 1 1 2 1 1 0 Electric vehicles Fuel cell Fuel economy/emissions Hybrid technologies Control systems Lights Navigation Sensors and cameras Artifical intelligence Steering systems Control systems Entertainment Software (apps, OS and cyber sec.) Shared vehicles Parts ordering Taxi services provider Vehicles IoIT Other Semiconductors Electrification Smart city Telecommunications Electronics Robots Software Used vehicles Fuel economy/emissions Integration of body production E-commerce Fuel economy Integration Electric vehicles Diagnostics Flying Powertrain Autonomous Driving Connectivity Mobility as a Service Industry 4.0 Sales Product Architecture Vehicles After Sales Vehicles Commentary • Investments in Powertrain technologies show a reverse trend: While OEMs have historically • With six out of a total of nine deals centered around Mobility as a Service technologies, been strong in Powertrain development and production, Automotive Suppliers push ahead OEMs aim to explore new secures of revenue to complement their traditional business: with 28 (90%) technology investments in 2017 Investments in technologies enabling Shared Vehicles (4 investments, 66%), Taxi Service • In the race to secure technologies to enable Autonomous Driving, suppliers dominate Providers (1 investment, 100%) or Vehicle Rental (1 investment, 50%) clearly indicate a across all technologies, most notably in Sensors and Cameras (12 investments, 100%) and changing focus of OEMs moving from product towards service Control Systems (2 investments, 100%) • In addition, suppliers strongly lead in the area of Industry 4.0 (8 investments, 100%) and automotive After Sales (3 investments, 100%) in attempts to secure additional revenue streams Technology driven M&A in the automotive industry From automobile to autonomous | 19
7 Appendix/International M&A European companies lead the way in acquisitions in 2017, followed by Asian companies. US companies lagging behind Most overall M&A from OEMs Most technology investments from OEMs Most overall M&A from suppliers Most technology investments from in 2017 in 2017 in 2017 suppliers in 2017 Rank 2017 Company # Deals in 2017 Rank 2017 Company # Deals in 2017 Rank 2017 Company # Deals in 2017 Rank 2017 Company # Deals in 2017 1 Daimler 8 1 Daimler 6 1 AMA Group 11 Aptiv 1 5 (formerly Delphi) 2 Renault 7 2 Volkswagen Group 3 2 Wuxi Coml Mansion 8 2 Continental 4 3 Volkswagen Group 5 3 Jaguar Landrover 2 3 Sumitomo 7 3 Denso 3 4 Isuzu Motors 4 4 Toyota 2 4 Genuine Parts Co 7 Dongxu Optoel. 5 Hyundai 3 5 Geely (incl. Volvo) 2 5 Michelin 6 4 2 Tech Co 6 Toyota 3 6 BorgWarner 1 6 Continental 6 5 Stoneridge Inc. 2 7 Great Wall 3 7 Nissan 1 Apollo Tourism & Tianjin Motor Dies 7 6 6 2 Leisure Co Ltd 8 Peugeot 3 8 Renault 1 Aptiv (formerly Delphi), 7 Lear 1 Honda, Sanyang, Geely, 9 General Motors 1 Denso, USC, UralATI, 9–10 Jaguar, Landrover, 2 8–10 Zhejiang VIE Science & 5 8 Michelin 1 Nissan, General Motors 10 Peugeot 1 Tech, Micheldever Tyre, Services 9 Valeo SA 1 10 Webasto 1 Top 5 largest overall transactions in 2017 Top 5 largest technology transactions in 2017 Rank 2017 Acquirer Target Value ($mil) Rank 2017 Acquirer Target Value ($mil) 1 LKQ Corp Stahlgruber Gmbh 2,089 1 Dongxu Optoelectronic Tech Co Shanghai Sunlong Bus Co Ltd 490 2 Genuine Parts Co Alliance Automotive Group SAS 2,000 2 Delphi Automotive PLC nuTonomy Inc 450 3 Key Safety Systems Inc Takata Corp-Business 1,573 3 Shenzhen Fenda Tech Co Ltd Shenzhen Furtunta Tech Co Ltd 419 4 Peugeot SA Adam Opel AG 1,210 4 Porsche Zweite Beteiligung PVT AG 338 5 Pon Holdings BV Accell Group NV 950 5 Aotecar New Energy Tech Co Ltd Jiangsu Highstar Battery 333 20 | Technology driven M&A in the automotive industry From automobile to autonomous
7 Appendix/International M&A The majority of targets for German deals is domestic, with a focus on mobility as a service technologies Major target countries for German acquisitions Major investors into Germany Commentary Target country 2015 2016 2017 Investor country 2015 2016 2017 • Germany is a net buyer, acquiring more foreign companies Germany 8 6 7 Germany 8 6 7 • The leading target country for German investors is United USA 2 2 2 France — 1 2 States, only overtaken by the sum of European countries France 1 1 1 USA 1 2 — Netherlands 2 — 1 China 1 — 1 • The leading investor in Germany for 2017 is France, while US UK — 1 1 Switzerland 1 — — companies did not acquire any German targets since 2016 Israel — — 1 South Africa — — 1 • For the first time since 2015, a Chinese company acquired a Denmark 1 — — Total 11 9 11 German automotive tech-company Italy — 1 — Taiwan 1 — — China — 1 — U.A.E. — — 1 Norway — — 1 Singapore — — 1 Total 16 12 16 Technologies acquired by German firms Technologies sold by German firms Commentary • New technologies for Mobility as a Service, Connectivity and 20 Product Architecture 20 Product Architecture Autonomous Driving are high in demand for German ∑ 16 Smart Supply Chain companies, while acquisitions for traditional technologies like ∑ 15 Sales 1 15 1 15 Vehicle Powertrain or Industry 4.0 are declining 2 ∑ 12 Powertrain • Targeted technologies in Germany are still traditional Sales 6 ∑ 11 ∑ 11 technologies like Powertrain or Industry 4.0, but increasingly 4 6 Mobility as a Service 1 1 Powertrain 10 10 1 ∑9 new technologies like Mobility as a Service or Connectivity 1 3 1 3 Mobility as a Service 3 1 Industry 4.0 4 2 4 Industry 4.0 5 1 3 5 1 Connectivity 4 1 2 1 Connectivity 3 3 3 1 2 2 1 1 0 Autonomous Driving 0 Autonomous Driving 2015 2016 2017 2015 2016 2017 Technology driven M&A in the automotive industry From automobile to autonomous | 21
7 Methodology & Authors Methodology Disclaimer Authors The source used for the data and charts in the study is This study has been prepared by Ernst & Young GmbH Dr. Peter Hertenstein Thomson ONE and the date range considered was January Wirtschaftsprüfungsgesellschaft (EY) for the purpose of Manager 2015 to December 2017. We have considered all acquisitions in providing the public with information about developments in Transaction Advisory Services which an automotive firm was either the target or acquirer. The the automotive market. EY points out that the study does not deals were divided into three broad areas, namely technologies represent an adequate basis for a final decision about the Phone +49 30 25471 23480 related to process improvements, technologies targeting new information shown in the study. The study is not to be seen as Mobile +49 160 939 23480 revenue streams and technologies for the final product. In comprehensive or complete in the sense of containing all the peter.hertenstein@de.ey.com total, 3,681 transactions were considered, of which 317 were facts that might be of interest in connection with the determined to be technology driven and relevant for the study. information described. The study has been prepared with the We have used the rates from Thomson ONE, and no usual care and diligence required for such studies. Unless adjustments were done for the purpose of this study. referring to EY itself, the information presented has not been reviewed by EY with regard to its accuracy or completeness. Christopher Grüne The information has been gathered by desktop research Manager (including public sources, disclosed information and Transaction Advisory Services acknowledged databases), complemented by our own market knowledge, but includes no confidential information in any Phone +49 30 25471 16131 sense – neither qualitative nor quantitative. EY is not Mobile +49 160 939 16131 responsible for incomplete or false information. Thus, readers christopher.gruene@de.ey.com are recommended to examine all information prior to any decision making. EY is not liable for any missing or false information and statements in this study, or other oral or written remarks made in connection with the study. The information in the study has been prepared for a certain target date, prior to its presentation. The main cut-off point for the research was 31 December 2017, with some exceptions relating to research and deals mentioned. Thus, the accuracy at the date of presentation cannot be guaranteed. Any statement regarding future developments is not binding and merely represents an expectation. 22 | Technology driven M&A in the automotive industry From automobile to autonomous
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