Car companies investing billions in M&A to play catch-up in AutoTech race

01 June 2018 Authored by Consulting.us

The automotive industry is at a crossroads as established giants spend heavily to fend off a challenge from tech companies. This struggle is reflected in the AutoTech M&A field which, according to new analysis from global M&A advisory firm Hampleton Partners, is the decisive battleground where the future of the automotive industry will be settled.

Hampleton have recently released their latest report on M&A activity in the quickly evolving field of Automotive Technology. The consulting firm boasts substantial expertise on such matters, having worked with a vast range of tech entrepreneurs and clients heavily engaged in Automotive Tech, IoT, VR/AR, Enterprise Software, and other emerging sectors. Based in Europe but with an office in San Francisco, the firm also offers corporate advisory services to technology companies.

"We're in a world where the car is now a technology platform, rather than a simple mode of transport,” says David Riemenschneider, Director at Hampleton Partners. “Traditional companies from across the automotive ecosystem are having to make the leap from supplying purely mechanical components to incorporating artificial intelligence, augmented reality and technology that enhances driver experience and safety.”

Riemenschneider and his team have found that some of the biggest names in the automotive world are pulling no punches in their ongoing struggle against the encroachment of big tech into the territory they have dominated unchallenged for almost a century. Among them are Ford and Continental which have made substantial acquisitions in recent years.

Top Acquirers

Rivalling the two giants – both founded more than a century ago – are technology firms like Intel, Delphi and Dassault Systemes. Other industry outsiders, but titans in their own space, who are making inroads into AutoTech include the Zurich Insurance Group, which snapped up connected car startup Bright Box late last year.

In the past 30 months – including the first half of 2018 – Hampleton found that there were 146 ‘active acquirers’ and that 20 of them made multiple acquisitions. German manufacturing firm Continental were the busiest with four acquisitions, notably November’s takeover of Argus Cyber Security.

Delphi and Reynolds & Reynolds – two technology firms – were also busy with three acquisitions apiece. Software development company Luxoft made two, as did Intel, and eDriving, none of which are traditional automotive market players. Only Denso of Japan and the Lear Corporation of Michigan (alongside Continental) have classic automotive pedigree.

The largest disclosed deals of 2017

Among the largest disclosed AutoTech M&A deals of 2017, only Ford represented the old guard, with honorable mentions to the John Wood Group and the Eastern Company. Ford’s $1 billion acquisition of Argo AI – an automated car startup that appeared out of the blue – is largely reckoned to be the automotive giant’s answer to the progress being made by Tesla and Google on the AI front.

But Ford’s big bet was dwarfed by Intel’s acquisition of MobilEye for $15.3 billion. The Israeli tech firm provides state-of-the-art software solutions to advance driver safety and will be at the forefront of Intel’s plans to succeed in the self-driving car space.

As the automotive industry races full speed toward automation and connected car technology, M&A in the space continues to transition from horizontal acquisitions and towards deals that provide buyers with compelling technology, digital services and new business models,” says Riemenschneider.

“Going forward, the spotlight for OEMs will continue to make the leap from supplying mechanical components and towards incorporating artificial intelligence, augmented reality and any technology that enhances driver experience and safety offerings.”

Riemenschneider – a native of Detroit Motor City – expects that the second half of 2018 will see more M&A activity encouraged by VC-backed AutoTech firms, and for industry disruption to continue “on an almost-daily basis.”

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