2020 Outlook for Automotive M&A: Will the Good Times Keep Rolling?

27 February 2020 Dashboard Insights Blog
Authors: Steven H. Hilfinger

Following a robust 2018, 2019 saw a modest slowdown in automotive M&A activity and a decline in deal value, due in large part to regulatory uncertainty, trade war impacts, declining global economic growth, abating automotive volumes, and a lack of megadeals.

Yet deals in the connected, automated, shared, and electric (CASE) mobility space – plus new partnerships between traditional automotive and technology companies – moved the needle and should continue apace in 2020. For instance, in efforts to build CASE systems, Volkswagen partnered with Ford in Argo AI, Hyundai partnered with Yandex, and BMW partnered with Daimler. Such partnerships provide these companies with the opportunity to pool resources and expertise, thereby reducing the costs of developing and scaling resultant technologies. Meanwhile, large technology companies – Amazon, Apple, Dyson, and Google, among them – have made significant bets in the automotive space, another trend we should see continue in 2020.

Another factor impacting M&A activity are interest rates, which were unexpectedly cut three times in 2019 which supported M&A activity. To date in 2020, the Fed appears ready to maintain a more “neutral” posture, but additional interest rate uncertainty results from 2020 being an election year.  In terms of underwriting, lenders are expected to remain careful in evaluating automotive transactions.

Although by historical standards the market remains relatively strong, ongoing political uncertainty (e.g. trade tensions with China), the impacts of the Coronavirus, the fear of an inevitable recession as the current cycle gets longer, and the expansion of CFIUS’ jurisdiction may have a dampening effect on M&A activity in 2020 – which, no matter the case, will surely be an interesting year to watch.

For more insights into where automotive M&A is headed and other key issues impacting the industry, check out Foley’s white paper on the “Top Legal Issues Facing the  Automotive Industry in 2020.”

This blog is made available by Foley & Lardner LLP (“Foley” or “the Firm”) for informational purposes only. It is not meant to convey the Firm’s legal position on behalf of any client, nor is it intended to convey specific legal advice. Any opinions expressed in this article do not necessarily reflect the views of Foley & Lardner LLP, its partners, or its clients. Accordingly, do not act upon this information without seeking counsel from a licensed attorney. This blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Communicating with Foley through this website by email, blog post, or otherwise, does not create an attorney-client relationship for any legal matter. Therefore, any communication or material you transmit to Foley through this blog, whether by email, blog post or any other manner, will not be treated as confidential or proprietary. The information on this blog is published “AS IS” and is not guaranteed to be complete, accurate, and or up-to-date. Foley makes no representations or warranties of any kind, express or implied, as to the operation or content of the site. Foley expressly disclaims all other guarantees, warranties, conditions and representations of any kind, either express or implied, whether arising under any statute, law, commercial use or otherwise, including implied warranties of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Foley or any of its partners, officers, employees, agents or affiliates be liable, directly or indirectly, under any theory of law (contract, tort, negligence or otherwise), to you or anyone else, for any claims, losses or damages, direct, indirect special, incidental, punitive or consequential, resulting from or occasioned by the creation, use of or reliance on this site (including information and other content) or any third party websites or the information, resources or material accessed through any such websites. In some jurisdictions, the contents of this blog may be considered Attorney Advertising. If applicable, please note that prior results do not guarantee a similar outcome. Photographs are for dramatization purposes only and may include models. Likenesses do not necessarily imply current client, partnership or employee status.

Related Services