PwC Deals. Trends and highlights. Executive summary

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1 of disclosed deal value Average disclosed deal value ($mn) PwC Deals Global Automotive Deals Insights YearEnd 17 In the driver s seat: Automotive M&A pushes forward in 17 Executive summary Global Automotive M&A activity was strong in 17. Automotive M&A deal value is up 29.9% to $3.2 billion. Volume is up 2.6% to 98 deals, and the average disclosed deal size increased 31.9% to $278.6 million. The increase in value and average deal size is primarily driven by two megadeals in 17 compared to zero in 16. The two megadeals were in AutoTech segment accounting for $23.3 billion of deal value, or 43.9% of all disclosed deal value in 17. We define AutoTech as investments in connectivity, autonomous, electrification, ridesharing and the software, sensors, intellectual property and other components that support these trends. AutoTech deal value increased more than fivefold from $.3 billion in 16 to $26.7 billion in 17, primarily due to both megadeals in 17 being AutoTech related. AutoTech deal volume was up 28.0%, from deals in 16 to 64 deals in 17. US acquirers spent $23.6 billion in 17, or 44.4% of disclosed deal value. With recent tax reform in the U.S. and the expected repatriation of cash, we expect US acquires to drive M&A activity in 18. Investments in connected, autonomous, and electrification made headlines and drove Automotive M&A activity in 17. Despite the risk associated with these AutoTech investments, this trend will continue to drive deal value in 18. Jeff Zaleski Partner, US Automotive Deals Leader PwC Trends and highlights Volume growth in 17 was driven by the Others subsector while all value growth was driven by the Component Supplier subsector. Consolidation within the aftermarket and dealership segments is racing alongside Component Supplier segment driving M&A volume. Dealerships accounted for 26.4% of the total automotive activity, and 12.7% of activity related to transactions in the aftermarket segment. Increased deal volume in the Others subsector was driven by aftermarket and dealer consolidation. Value growth was driven by Component Suppliers, as deal value more than doubled to $.7 billion in 17. Both megadeals transacted in 17, and 60% of the top deals, targeted Component Suppliers. Global Automotive M&A deals by disclosed value $ $186 $161 $141 $214 2 $279 6 $ < mn mn bn > bn Average deal size (RAxis)

2 Assembly volumes (millions) Highlights of 17 deal activity M&A market activity improves Global Automotive M&A deal volume and value Deal value and volume in 17 outpaced 16, with M&A activity reaching the highest level since 07 (604 deals). Total 17 transaction value of $3.2 billion is up 29.9% from 16, while 98 deals were closed in 17, up 2.6% The Component Supplier subsector continues to drive M&A value growth while dealership and aftermarket consolidation is fueling growth in M&A volume Local deals continue to be attractive and make up a large share of the deal volume, however, a majority of deal value is attributable to cross border AutoTech deals. $44.9 $30.2 $21.7 $38.7 $62.1 $41.0 $ Disclosed deal value (RAxis) Largest transaction $1.3B Megadeals ($B and over) 2 megadeals Intel s $1.3 billion acquisition of MobileEye an advanced driverassistance system providing warnings for collision prevention and mitigation, accounted for 28.8% of total disclosed deal value in 17. There were two transactions in 17 exceeding $ billion (compared to zero in 16 and four in 1), making up 43.9% of total disclosed deal value. Both megadeals in 17 were AutoTech related. Automotive assembly According to PwC Autofacts, the industry is expected to add.4 million units of production between 17 and 24 for a compounded annual growth rate (CAGR) of 2.8%. The majority of this growth stems from China with a contribution to growth (CTG) rate of nearly 43% (or 8.7 million units), followed by India with a CTG rate of nearly 12% (or 2.4 million units). Global light vehicle assembly outlook Global light vehicle assembly outlook Automotive M&A deal volume Source: PwC Autofacts 18, Q1 Release PwC Deals Global Automotive Deals Insights YearEnd 17 2

3 EV / Revenue EV / EBITDA Highlights of 17 deal activity (cont.) Transaction multiples Disclosed transaction multiples for the automotive industry varied in 17. The implied EV/EBITDA multiples for automotive transactions announced increased from 8.2x in 16 to 9.6x in 17, respectively. Additionally, the implied EV/Revenue multiples for automotive transactions announced stayed relatively consistent, dropping slightly from 1.2x to 1.1x in 17, respectively. Multiples are not available for all deals and historically may get revised as subsequent information becomes available. Although reported EBITDA multiples are higher for 17, as more information becomes available, we believe valuation multiples were flat to declining in 17. Transaction multiples (median) x 1.0x 0.x 0.0x Source: Capital IQ 11.x 8.2x 9.6x 1.4x 1.2x 1.1x EV / Revenue EV / EBITDA 12.0x 11.0x.0x 9.0x 8.0x 7.0x Venture capital activity Global venture capital deal volume and value for all industries increased in 17 by.% and 49.%, respectively. With 11,042 deals completed worth $164.4 billion, 17 was a recordsetting year for venture capital. While the AutoTech sector is only a small portion of global venture capital, venture capitalists are showing interest in investing in early stage enterprises focused on artificial intelligence, software, and other technologies in and around the mobility ecosystem. Two AutoTech areas are receiving noteworthy capital from investors: Ondemand transportation applications Received over $2. billion in venture capital funding in 17 for the fourth consecutive year. Lyft raised approximately $1. billion in 4Q17 alone, evidencing increased interest in ride sharing and autonomous vehicle programs. Electric and autonomous vehicles The most notable recipient of venture capital funds this year is NIO, a Shanghaibased startup focusing on designing and developing autonomous and premium electric vehicles, that raised $1 billion in 4Q17. Along with Component Suppliers and vehicle manufacturers, venture capitalists are also focusing on alternative powertrains that will drive the future of the automotive industry. The car of the future will be electrified, autonomous, shared, and connected. Venture capitalists will continue to play an integral role of reshaping the automotive industry by injecting cash in early stage technologies and business models. Source: CB Insights MoneyTree Report AutoTech trends 17 AutoTech deal volume (64 deals) Significant investments are being made in alternative powertrains, autonomous vehicles, ride sharing/mobility services, and online vehicle dealerships/trading platforms. Not only are traditional automotive companies acquiring tech companies, tech companies are acquiring traditional automotive companies and other AutoTech focused companies. 3% 41% Tech acquiring tech Tech acquiring nontech Nontech acquiring tech Deal value increased over fivefold from $.3 billion in 16 to $26.7 billion in 17, as both megadeals in 17 were AutoTech related. increased 28%, from deals in 16 to 64 deals in 17, primarily driven by Component Supplier activity. In 17, the main focus in AutoTech were driver assistance technologies and alternative powertrains, which includes lithium ion battery manufacturing. In Asia, alternative powertrain companies were attractive assets in autotech, comprising 16 deals. The US, Europe, and ROW regions were the most targeted regions for driver assistance technologies. Trade buyers dominated AutoTech deal activity, transacting 84.4% of AutoTech deals, compared to 1.6% of deals transacted by financial buyers. 6% 17 AutoTech deal volume by subcategory (64 deals) 3% 8% 11% 11% 42% 2% Alternative powertrains Connected car Autonomous vehicles Online dealerships/trading Ride sharing Other PwC Deals Global Automotive Deals Insights YearEnd 17 3

4 $1.4 $6.3 $4.8 $7.7 $.7 $7.7 $. $ $ $ $8.9 $ $9.1 $ $.2 $9.2 $12.1 $11.4 $14.4 $19.8 $17.4 $ $ $ $.4 $18.4 $ $23.3 Subsector highlights and outlook Subsectors highlights While differences within the subsectors exist, each continues to see trends around expansion of technologies, consolidation, and expansion in emerging markets. Component Suppliers The Component Suppliers category includes companies who sell products to be used in the manufacturing of vehicles. With deal value of $.7 billion, the strong performance of Component Suppliers marks an alltime high, compared to the last 1 years. In terms of deal volume, 194 deals were transacted in 17, down.6% or 23 deals compared to 16. Globally, Component Suppliers continue their focus on AutoTech transactions as AutoTech deals were completed in 17, compared to 28 in 16. Technology deals include, but are not limited to, connected car technologies, autonomous components, car/ride sharing applications, and alternative powertrains. The two largest deals in 17 were Intel s acquisition of MobileEye and Samsung s acquisition of Harman International. We expect this trend to continue as evidenced by the recent announcement of ZF Friedrichshafen AG s acquisition of Beespeed Automatizari s automotive unit a leading supplier of automotive software development and testing and Continental AG s acquisition of EasyMile a provider of autonomous vehicle software and mobility solutions. Although autonomous and mass penetration of electric vehicles is a decade away, these technologies will continue to drive deals in 18, creating significant risk as the industry tries to figure out the technological winners and losers. Component Suppliers M&A activity Nonmegadeal Megadeal (RAxis) Vehicle Manufacturers The Vehicle Manufacturers category includes car, bus, motorcycle, commercial, heavy truck, and recreational vehicle assemblers. Deal value among Vehicle Manufacturers decreased 28.8% in 17, however, deal volume increased 4.8%. Two of the top deals were in the Vehicle Manufacturer subsector, led by Huangshan Jinma s (producer of car bodies, molds, and electrical parts) merger with Yongkang Zotye Auto (privately owned automobile manufacturer) for $2 billion and Peugeot SA s acquisition of General Motors European Opel brand for $1.2 billion. These two deals comprise 9.1% of Vehicle Manufacturer deal value in 17. Car and motorcycle manufacturer deal volume was largely flat from 16 to 17. The upward trend in deal volume for Vehicle Manufacturers is primarily driven by nine autonomous and electric vehicle manufacturers in 17, compared to five in 16. Asian vehicle manufacturers comprised of 4.% of Vehicle Manufacturer activity during 17, compared to.0% in 16. Specifically, China vehicle manufacturer activity comprised of 2% of all vehicle manufacturer activity during 17. China s governmental influences continue to drive consolidation in order to reduce inefficiencies, lower overall costs, and develop new products. Vehicle Manufacturers M&A activity Nonmegadeal Megadeal (RAxis) PwC Deals Global Automotive Deals Insights YearEnd 17 4

5 $12.9 $.9 $4.9 $.2 $11.2 $13. $7.0 $ $ $ $ $12.4 $6.3 $ Subsector highlights and outlook Subsectors highlights (continued) Others Others M&A activity The Others category includes retail, dealership, aftermarket, rental/leasing, distribution, repair/maintenance shops, and software for ride sharing. Driven by an absence of larger deals, including megadeals, the yearoveryear decrease in deal value of 48.1% is the second year in a row of declining deal value. Increases in deal activity for the Others subsector was primarily driven by aftermarket deals increasing, from 4 in 16 to 76 deals in 17. This is largely being driven by an aging car parc (cars are on the road longer resulting in growth in service and service parts). Dealership consolidation is also on the rise with a 26.4% increase from 133 to 18 deals from 16 to 17, respectively. Europe led the Others subsector in terms of value and volume in 17 with $4.4 billion (63.2% of subsector value) transacted in 133 deals. The most popular European target were dealerships with 48 deals, followed by repair and maintenance companies with 23 deals Nonmegadeal Megadeal (RAxis) 16 Share of deal volume Others 17 Share of deal volume Others 31% 19% 41% Dealership Aftermarket Repair & maintenance 16% 44% All others 14% 14% 21% 18 Automotive deals outlook Vehicle manufactures, suppliers, technology companies, and venture capital will continue to invest in technology which will aim to disrupt the automotive industry and threaten traditional business models. 18 will see continued investment in alternative powertrains, connected car technologies, ride sharing, artificial intelligence, and predictive analytics. Given the global nature of automotive industry, we expect continued focus on cross border activity buoyed by a potential increase in Europe. In the US, the longawaited tax overhaul could inject companies and venture capitalists with additional cash to fuel M&A activity and megadeals. Even with interest rates increasing, the cost of debt remains historically low. Coupled with a strong economic environment and historically high profits will likely result in continued high valuation multiples automotive sector. Asian buyers will continue to be active given further consolidation opportunities, market growth and expected regulations driving the need for alternative powertrain technologies. PwC Deals Global Automotive Deals Insights YearEnd 17

6 Regional deal trends in 17 Regional analysis for 17 Local deals (transactions between targets and acquirers within the same borders) continue to dominate the M&A landscape in 17, as 8.3% of total deal volume was within the same region. 4.1% of deal value (or $24 billion) was attributable to these local deals. US deals Overall, the US companies have been aggressive deal makers in 17. US acquirers drove growth in global deal value, increasing their share of disclosed deal value from 18.1% in 16 to 44.4% in 17, primarily due to Intel s $1.3 billion acquisition of MobileEye. The share of deal volume by US acquirers increased to 28.8% in 17, from 27.1% in 16. The share of deal volume where US companies were the target increased to 27.4% in 17, compared to 2.2% in 16. Crossborder deals Total crossborder activity in 17 was $29.2 billion compared to $8.9 billion in 16. In addition to the US, Asian acquirers were very active in 17. Eight of the top deals involved Asian acquirers, which represented 33.% of total disclosed deal value. The share of deal value for Asian acquirers (both locally and outbound) for 17 was 42.6%, compared to.6% in 16. However, excluding all megadeals, Asian acquirers made up 49% of deal value, Asian targets comprised 47.2% of deal value. As automotive markets continue to grow and mature in Asia, especially China, we expect this region to continue to play a major role in global automotive M&A. Europe lost the most share of the deal volume and value during 17 as none of the megadeals involved European companies. European targets were less attractive as the share of deal volume has declined to 36.8% in 17 versus.7% in 16. Foreign companies continue to struggle to close deals in Asia, with only 12 inbound deals with a disclosed value of $270 million, despite the growth in the overall automotive market in the region. MobileEye, located in Israel, drove nearly all the inbound deal value in the Rest of World. Automotive deals by region US Local: 14 deals, $. billion Inbound: 19 deals, $8.88 billion Outbound: 27 deals, $18.42 billion Europe Local: 181 deals, $4.4 billion Inbound: 39 deals, $4.64 billion Outbound: 19 deals, $0.8 billion Asia and Oceania Local: 1 deals, $13.8 billion Inbound: 12 deals, $0.27 billion Outbound: 2 deals, $8.84 billion Rest of the world Local: 44 deals, $0.42 billion Inbound: 18 deals, $1.42 billion Outbound: 17 deals, $1.37 billion and other publicly available sources PwC Deals Global Automotive Deals Insights YearEnd 17 6

7 % 14% 42% 2% 32% 19% 17% Share of M&A activity $13.7 $4.2 $9.2 $9.8 $.0 $7.9 $9.0 $31.2 $26.1 $12. $29.0 $42.1 $33.1 $44.2 Financial vs. Trade buyers Financial buyers Financial buyers saw an increase in deal value in 17, up 13.9% compared to 16. Regionally, the increase in deal value is primarily driven by investments in Asia. Of the $9 billion in financial buyer disclosed value, $6.9 billion was in Asia. Overall, financial buyers share of M&A activity dropped from 2.6% in 16 to 22.1% in 17. Although overall share is down, financial buyers were more interested in Component Suppliers in 17, as they completed 1 Component Supplier deals, versus 46 in 16. Financial buyers were also interested in autotech targets in 17, as they completed ten autotech deals, compared to six in 16. Trade buyers During 17, deal value and volume increased for trade buyers to the highest levels since 06. increased 7.4% to 466 completed deals, while deal value grew 33.7% to $44.2 billion. Both megadeals completed in 17 were transacted by trade buyers, accounting for $23.3 billion, or 43.9% of total disclosed deal value. Excluding megadeals, trade buyer s deal value decreased $12.2 billion, or 36.9%. However, trade buyers average disclosed deal value increased from $76.3 million in 16 to $94.9 million in 17. Financial Buyer M&A activity Trade Buyers M&A activity Financial value Financial volume (RAxis) Trade value Trade volume (RAxis) Financial Buyer Share of M&A Activity % % 3% 2% 30% 2% 27% 24% 2% 27% 26% 22% % 1% % % 0% Financial share of total value Financial share of total volume PwC Deals Global Automotive Deals Insights YearEnd 17 7

8 17 Top Automotive Transactions Date effective Target name Target region Acquirer name Acquirer region % of share acquired Value of transaction ($mil) Buyer type Category 1 08/09/17 MobileEye ROW Intel US 1, TRADE Comp 2 03//17 Harman Intl Industries Inc. US Samsung Electronics Co. Ltd. Asia 8,041 TRADE Comp 3 0/08/17 Calsonic Kansei Corp. Asia CK Holdings Co. Ltd. Asia 4,4 FIN Comp 4 04/11/17 Yongkang Zotye Auto Co. Ltd. Asia Huangshan Jinma Co. Ltd. Asia 2,047 TRADE VM 11/2/17 Alliance Automotive Group SAS Europe Genuine Parts Co. US 2,000 TRADE Other 6 04/06/17 Metaldyne Performance Group US American Axle & Manufacturing Holdings Inc. US 1,12 TRADE Comp 7 08/01/17 General Motors UK Ltd. Europe Peugeot SA Europe 1,2 TRADE VM 8 01/26/17 Zhe Jiang Long Sheng Qi Che Asia Investor Group Asia 73 1,067 FIN Comp 9 11/01/17 GMAC UK PLC Europe Investor Group Europe 96 FIN Other /31/17 FTE Automotive GmbH Europe Valeo SA Europe 917 TRADE Comp 11 04/07/17 Beijing Pride New Energy Asia Guangdong Dongfang Precision Science & Technology Co. Ltd. Asia 793 TRADE Comp 12 09/27/17 Supreme Industries Inc. US Wabash National Corp. US 697 TRADE Comp 13 0/30/17 Uniwheels AG Europe Superior Industries International Inc. US TRADE Comp 14 09/07/17 Penske Truck Leasing Co. LP US Mbk Usa Commercial Vehicles Inc. US TRADE Other 1 03/21/17 PKC Group Oyj Europe Motherson Sumi Systems Limited ROW 619 TRADE Comp 16 12/19/17 Goldcar Spain SL Europe Europcar Groupe SA Europe 616 TRADE Other 17 03/31/17 Nippon Sheet Glass Co. Ltd. Asia Investor Group Asia 43 FIN Comp 18 /26/17 Shanghai Sunlong Bus Co. Ltd. Asia Dongxu Optoelectronic Technology Co. Ltd. Asia 490 TRADE VM 19 /02/17 Mazda Motor Corp. Asia Toyota Motor Corp. Asia 4 TRADE VM /24/17 Nutonomy US Delphi Automotive PLC US 4 TRADE Comp PwC Deals Global Automotive Deals Insights YearEnd 17 8

9 About PwC s Deals Practice Authors Jeff Zaleski Partner, US Automotive Deals leader jeffrey.e.zaleski@pwc.com Gonzalo Nespolo Director, Automotive Deals gonzalo.m.nespolo@pwc.com Chris Sutton Senior Associate, Automotive Deals christopher.m.sutton@pwc.com Contributor Steve Shanker Partner, Valuation steve.shanker@pwc.com Smart deal makers are perceptive enough to see value others have missed, flexible enough to adjust for the unexpected, aggressive enough to win favorable terms in a competitive environment, and circumspect enough to envision the challenges they will face from the moment the contract is signed. But in a business environment where information can quickly overwhelm, smart deal makers look to experienced advisors to help them fashion a deal that works. PwC s Deals group can advise automotive companies and automotivefocused private equity firms on key M&A decisions, from identifying acquisition or divestiture candidates and performing detailed due diligence, to developing strategies for capturing postdeal profits and exiting a deal through a sale, carveout, or IPO. With more than 9,800 deals professionals in 7 countries, we can deploy seasoned teams that combine deep industry skills with local market knowledge virtually anywhere and everywhere your company operates or executes transactions. Although every deal is unique, most will benefit from the broad experience we bring to delivering strategic M&A advice, due diligence, transaction structuring, M&A tax, merger integration, valuation, and postdeal services. In short, we offer integrated solutions, tailored to your particular deal situation and designed to help you extract value within your risk profile. Whether your focus is deploying capital through an acquisition or joint venture, raising capital through an IPO or private placement, or harvesting an investment through the divesture process, we can help. For more information about M&A and related services in the automotive industry, please visit or For a deeper discussion on deal considerations, please contact one of our practice leaders or your local Deals partner: Felix Kuhnert Partner, Global & European Automotive leader felix.kuhnert@pwc.com Hitoshi Kiuchi Partner, Asia Pacific Automotive leader hitoshi.kiuchi@pwc.com Ramesh Telang Partner, US Automotive leader ramesh.d.telang@pwc.com About the data The information presented in this report is an analysis of deals in the automotive industry where the target company, the target ultimate parent company, the acquiring company, or the acquiring ultimate parent company was in the automotive industry. For purposes of this report, automotive includes onhighway vehicle manufacturers, component suppliers, aftermarket, repairs/maintenance and dealers. Onhighway includes cars and light trucks, motorcycles, heavy trucks, buses and recreational vehicles. Deal information was sourced from Thomson Reuters. Certain adjustments have been made to the information to exclude transactions which are not specific to the onhighway or automotive sector or incorporate relevant transactions that were omitted from the industry codes initially utilized. This analysis includes individual mergers, acquisitions, and divestitures for disclosed or undisclosed values, leveraged buyouts, privatizations, certain minority stake purchases, and acquisitions of remaining interest effective between January 1, 17 and December 31, 17, with a deal status of completed. 18 PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see for further details. Disclaimer: This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.