Automotive technology

Deal activity in automotive technology has been subdued due to Covid-19

The automotive technology M&A market saw an 11% decline in deal volume in the first half of 2020 compared to the second half of 2019, according to a recent report by technology M&A consultancy Hampleton Partners. The value of deals in the first half of 2020, meanwhile, fell to a paltry $4 billion, signaling a lack of successful deals.

The autotech sector has been hit hard by the pandemic, with travel restrictions and fewer people using and buying cars. Ride-sharing, meanwhile, has seen a further drop in demand due to consumer safety concerns. At the height of the crisis, Uber saw its rides drop 80% and its revenue drop 29% year-on-year (YoY), forcing the company to cut 3,700 jobs.

Between April 2019 and April 2020, vehicle sales fell 80% year-over-year in Europe, 52% in the United States and 3% in China. Auto sales are expected to decline between 14% and 22% in the US, European and Chinese markets in 2020.

While Covid had a negative impact on the entire industry, the M&A market for autotech fell to 41 deals in the first half of 2020 from 46 deals in the second half of 2019. The first half of 2020 also saw saw half the number of private equity deals (3), suggesting that private equity firms do not currently see autotech as a hot sector.

“We have seen the dramatic impact of the pandemic on automotive transactions in the first half of 2020, with OEMs and suppliers distracted from mergers and acquisitions while putting out supply chain fires and facing reduced demand. of new vehicles,” said Miro Parizek, lead partner. , Hampton Partners.

“It remains to be seen what the long-term impact will be on car usage and shopper habits post-Covid, but at the end of the first six months of 2020 we have seen a recovery in China and expect the overall market will improve in 2H 2020. After all, with disruption comes new opportunities for consolidation and inorganic growth.”

A continuing trend is that tech giants continue to expand into the autonomous and electric vehicle spaces, while OEMs reposition themselves as “tech” companies.

Regionally, over the past 30 months, approximately 54% of autotech targets were based in North America, while 34% were based in Europe. North American targets accounted for 61% of transactions in the first quarter of 2020, but fell to 36% in the second quarter, amid general uncertainty in the US economy during the pandemic.

The Hampleton report divides the autotech sector into four segments. Enterprise applications accounted for the largest share of transactions (35%), followed by mobility and fleet management (26%), software and embedded systems (25%), and commerce and content on Internet (14%).

Autotech M&A Transactions by Subsector

Mobility and Fleet Management saw a slight increase in transaction volume between H2 2019 and H1 2020, from seven to nine transactions. This is partly because logistics companies have adapted their freight and transportation assets to cope with increased deliveries due to an increase in e-commerce demand during the pandemic. For example, fleet management system Omnitracs acquired VisTracks, a provider of SaaS compliance solutions for transportation and logistics.

The biggest deal in the region was Intel’s $840 million acquisition of Moovit, an Israeli startup that analyzes traffic patterns and makes transportation recommendations. Intel will use the acquisition to expand its Mobileye mobility-as-a-service offering, as well as support its plans to become a large-scale mobility provider, including robotaxi services.

Software and embedded systems deals fell from 11 to 8 in the first half of 2020. Deals in the area have focused on mature targets based on AI technology, according to Hampleton.

The biggest deal was Amazon’s acquisition of Bay Area self-driving car startup Zoox for $1.3 billion. Amazon will work with Zoox to create a fleet of robotaxis to compete with Alphabet’s Waymo.

Enterprise app deals fell from 16 to 19 in the first half of 2020. Volkswagen bought the rest of digital marketing services company Diconium, after acquiring 49% of the Stuttgart-based company in 2018. VW is looking to create a global online sales platform that allows customers to purchase and manage digital services for their networked vehicles.

Internet commerce and content transactions, meanwhile, fell from 12 transactions in H2 2019 to 5 transactions in H1 2020.