M&A activity declined in 2016, and now dealmakers eye Trump

Now that Donald Trump is president, the auto industry’s dealmakers may be putting acquisitions on hold to see what he plans to do.

Last year, purchasers closed 583 deals to buy automotive suppliers, dealerships and other automotive businesses — down from 591 the prior year, according to a new report by PricewaterhouseCoopers.

While that’s only a slight decline, the total value of those deals fell more sharply to $ 41.0 billion, down from $ 62.1 billion.

Much of the discrepancy is due to ZF Friedrichshafen’s acquisition of TRW Automotive, a $ 12.4 billion deal that closed in 2015.

Moreover, PwC did not include Samsung’s $ 8 billion bid for Harman International last year because it has not yet closed. If the TRW and Harman deals are excluded, the overall value of last year’s M&A deals declined 17 percent.

Jeff Zaleski, author of the PwC study, says the global auto industry looks healthy this year. But dealmakers want to assess Trump’s influence on environmental rules, international trade and the overall economy.

“Companies use acquisitions to pursue long-term strategies,” Zaleski said. “But they are watching to see what impact Trump will have on those long-term strategies.”

Over the next five years, PwC expects global vehicle production will rise 3.1 percent annually. Barring a trade war or recession, that should give dealmakers enough confidence to pursue long-term growth.

Once again, it looks like automotive suppliers will generate much of that action.

Last year, suppliers generated half of automotive M&A activity with deals totaling $ 19.8 billion. To be sure, that was down sharply from $ 32.9 billion in the previous year, the first annual decline since 2012.

Looking ahead, Zaleski expects dealmakers will seek out companies with cutting-edge technology for self-driving vehicles, connected cars and better fuel economy.

But all of that depends on a question mark named Trump.

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