Insight

Automotive M&A Quarterly Newsletter Q1 2021

Read more about M&A activity in the automotive sector

Ford Phillips

Ford Phillips

Managing Director, KPMG Corporate Finance LLC

+1 312-665-1537

Automotive Stamping

Automotive Stamping M&A 

The COVID-19 outbreak and subsequent two-month shutdown of the auto industry in the spring of 2020 put many stamping companies in a dire situation. The government’s swift actions via the CARES Act and the Paycheck Protection Program, as well as lenient lenders, played an essential part in overcoming these difficult times.

Despite recent challenges, we anticipate an increasing level of M&A in the stamping sector. The competitive landscape continues to be highly fragmented, with many private companies heavily concentrated with specific customers and platforms. Acquisitions continue to be the best way to address these issues by gaining economies of scale, diversifying, and improving raw material purchasing power.

For this newsletter, we focus on several of critical transaction considerations for both buyers and sellers when evaluating automotive stamping M&A.

Critical Transaction Considerations in Automotive Stamping M&A

  • Industry Diversification
  • Light-weighting Abilities
  • Exposure to growing S/CUV and light truck platforms
  • Exposure to EV manufacturers
  • Customer Concentration

Automotive Industry M&A Synopsis and Key takeaways

Landmark M&A Announcement

Goodyear to Acquire Cooper Tire, Creating Stronger U.S.-Based Leader in Global Tire Industry
Enterprise Value (EV)
$2,470 million
EV / Revenue
0.98x
EV / EBITDA
6.3x


On February 22, 2021, Goodyear announced the agreement to acquire Cooper Tire in a transaction with a total enterprise value of approximately $2.6 billion. The transaction will expand Goodyear’s product offering by combining two portfolios of complementary brands. It will also create a stronger U.S. manufacturer base with an increased presence in distribution and retail channels while combining both companies’ strengths in the highly profitable light truck and SUV product segments.

“This is an exciting and transformational day for our companies. The addition of Cooper’s complimentary tire product portfolio and highly capable manufacturing assets, coupled with Goodyear’s technology and industry-leading distribution, provides the combined company with opportunities for improved cost efficiency and a broader offering for both companies’ retailer networks. We are confident this combination will enable us to provide enhanced service for our customers and consumers while delivering value for shareholders.”
- Richard J. Kramer, Goodyear chairman, Chief Executive Officer and President

Key takeaways

Automotive Stamping M&A Activity is Anticipated to Increase

  • The highly fragmented nature of the automotive stamping industry, coupled with customer concentration and supply chain challenges, point toward an increase in M&A activity
  • However, there are a number of factors that both buyers and sellers should take into consideration while contemplating a transaction
  • From a sellers’ perspective, identifying and proactively addressing certain issues and challenges will help improve transaction certainty and allow for a more competitive process

Valuation Observations and Sector Performance

  • The valuation multiples for auto parts suppliers have slightly decreased over the previous quarter
At the end of Q1’21, the average EV / LTM EBITDA multiples were: NA Auto Parts 
Manufacturers
10.5x
(0.3x) Q-o-Q

 


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