Strategic M&A Insights in Challenging Industries
There has always been an elemental symmetry to M&A: A seller concludes that a business or asset does not fit its enterprise portfolio, and a natural buyer recognizes that the same target is a strategic match. Put simply, there’s a buyer for every seller, or so the logic goes.
However, the ideal does not always meet the reality. Despite a recent increase in M&A activity across many sectors during 2024 (including a first-half increase in deal value that was 22 percent higher than the corresponding first six months of 2023), some industries face challenges that can’t be addressed by a traditional, straightforward pairing of a seller with an obvious buyer—or, it may seem, with any acquirer at all. This is particularly so in the following cases: in highly competitive, low-margin market segments; when competition is highly cyclical and cash intense; when a sector may be exposed to “sunset” technologies; or when business lines have limited product differentiation. Companies may also be compelled to sell under suboptimal circumstances, such as complying with regulatory conditions to close a deal, which may result in a reduced price.
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Many of these challenges are confronted by sectors globally. They are particularly evident in the automotive industry. Not surprisingly, automotive M&A activity hit a 20-year low in 2023—and hasn’t meaningfully bounced back (Exhibit 1). Looking at advanced industries more broadly, the sector’s share in global M&A deal value decreased from a peak of 12 percent in 2020 to only 5 percent in the first half of 2024. This low activity level is fueled in particular by tectonic change in the sector, not least the rise of Chinese OEMs and the global transition to battery electric vehicles (BEVs).
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Automotive uncertainty: A template for challenging M&A conditions
For more than a century, the automotive industry has been a dynamo for local and global economies. That’s still the case today, and the mobility ecosystem will remain essential in the decades ahead.
Getting creative about dealmaking
Expand the universe of potential buyers
Transform before transacting
Tell a more tailored story
Get proactive on alternative financing
Consider alternative transaction structures
Deals don’t always have an obvious buyer, particularly when an industry’s technologies are beginning to sunset and sectors are experiencing tectonic change. But as the automotive industry demonstrates, proactive dealmakers can still find creative solutions for M&A challenges, getting deals done despite profound challenges and creating value for sellers and buyers—even when finding the right buyer requires a more imaginative approach.
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