After a two-year slowdown, Continental AG and Faurecia SA are expected to drive mergers and acquisitions in Europe’s auto-components industry. During the slowdown, private equity companies had gone around looking for deals. PRTM, a consulting firm based in Waltham, Massachusetts, said that transactions involving European auto-parts manufacturers as targets could total up to 85 this year, standing for a 13% increase from 2009.
In the first eight months of the year, 50 deals were racked up. The total value could fall short of the $9.2 billion posted last year, when Schaeffler Group paid $6.5 billion for a stake in Continental, the world’s second-largest auto-parts maker.
In an interview, Juergen Geissinger, CEO of Schaeffler, said that M&A markets are finally opening up again after the crisis. He explained that there is new activity as companies are not as wary about where to invest their capital.
In Europe, the push to consolidate is strengthened by the continuing withdrawal of payments by the government’s “cash-for-clunkers” program, which mitigated the drop in car sales during the economic downturn.
But now, the incentive program is believed to be hampering the recovery. PRTM said that there is tremendous pressure for link-ups in businesses where suppliers are small but have numerous potential buyers, such as the makers of chassis parts, transmissions, seats and door panels.
A PRTM study shows that worldwide, supplier acquisitions may total 300 in 2010 after achieving 241 last year. To arrive at this figure, PRTM studied data and executive comments to evaluate the potential roles of 560 automotive suppliers as buyers, sellers or financially distressed companies. In the auto industry through May, 108 deals were entered -- the fastest rate in nine years. [via Bloomberg]