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

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.”

© 2020 Foley & Lardner LLP

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About this Author

Steven H. Hilfinger, Foley Lardner, Senior Lender Counsel, Global Finance Lawyer
Partner

Steve Hilfinger is a partner and business lawyer with Foley & Lardner LLP. He has more than 25 years of transactional and finance experience, including representing private and public companies, senior lenders, mezzanine lenders and borrowers, venture capital funds and private equity funds, automotive suppliers and other manufacturers. Mr. Hilfinger focuses his practice in corporate and securities law matters, including mergers and acquisitions, corporate restructurings, private equity and venture capital transactions, debt and equity finance transactions, business...

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Igli Psari Associate Detroit Transactions Corporate
Associate

Igli Psari is an associate and business lawyer with Foley & Lardner LLP, he is also a member of the firm’s Transactional & Securities and Private Equity & Venture Capital Practices. Igli focuses his practice on mergers and acquisitions, private equity transactions, corporate governance matters, and strategic commercial transactions. Prior to joining Foley, he was an associate at a large national Detroit based law firm. 

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