SPACS push up deals in the automotive sector | White & Case LLP
Auto and Auto-Adjacent M&A Record Fourth Consecutive Quarterly Increase in Value, Driven by PSPC’s Strong Interest in Electric Vehicles
Looking at mergers and acquisitions in the auto industry, one would think that the pandemic never happened.
After a rapid and dramatic COVID blow in the first quarter of 2020, the value of transactions in the global automotive sector has steadily increased throughout the pandemic period. The sector’s value in the first quarter of 2021 reached US $ 40.8 billion (the highest since the US $ 52 billion in the second quarter of 2009), while the volume reached 89 transactions, two impressive increases from the value of 5.6 billion US dollars in the first quarter of 2020 and 72 transactions.
The boom in PSPC – a remarkable multisector global trend in 2020 – has been a big contributor to the surprising rise in the automotive industry, as thriving electric vehicle (EV) businesses have been particularly popular targets for PSPC acquisitions during the doldrums. pandemic.
A slight increase at the end of 2020 was largely due to PSPC transactions, many involving companies using CASE technologies (connected, autonomous, shared, electrified). As in a variety of other industries, PSPC’s boom in auto mergers and acquisitions began in 2020, with the US $ 1.8 billion business combination of SPAC Graf Industrial Corp. with Velodyne Lidar.
Service providers are expected to continue accelerating mergers and acquisitions through 2021, thanks to the growing acceptance of electric vehicles and the US $ 2.5 trillion expected to change hands before 100% electrification is achieved .
SPAC EV are changing gears
Even the most profitable auto deal in the first quarter – the $ 11.8 billion merger between US electric vehicle producer Lucid Motor and US company SPAC Churchill Capital Corp. – was an example of the PSPC trend.
California start-up Lucid, backed by Saudi Arabia’s sovereign wealth fund, the Public Investment Fund (PIF), plans to start shipping its first luxury electric vehicle, the Air sedan with a range of 500 miles, later this year. The deal, announced in February, values Lucid at around US $ 24 billion.
Other significant acquisitions by SPAC of electric vehicle companies in the first quarter included the merger of Israel-based REE Automotive with US-based SPAC 10x Capital Venture Acquisition Corp. for an enterprise value of $ 3.1 billion, the $ 2.5 billion merger between US developer of luxury electric vehicles Faraday. & Future and Property Solutions Acquisition Corp. and Decarbonization Plus Acquisition Corporation for US $ 2 billion from Hyzon Motors, a US supplier of commercial vehicles and electric trucks.
Of course, the auto M&A boom hasn’t attracted PSPCs alone. The quarter also saw two significant transactions involving tire companies: the acquisition of Cooper Tire & Rubber Company for US $ 2.5 billion by Goodyear and the acquisition of Mavis Tire for US $ 6 billion by a consortium of private equity firms which included TSG Consumer Partners and BayPine.
Despite the PSPC trend, traditional mergers and acquisitions have represented and will continue to represent the overwhelming majority of M&A transactions in the automotive industry. But as with PSPC transactions, CASE companies see most mergers and acquisitions. Recent examples include Amazon’s acquisition of Zoox for $ 1.2 billion, acquisition of Postmates by Uber for $ 2.6 billion and acquisition of Navistar by Traton for $ 3.7 billion. .
The auto sector continued to recover from the COVID-19 pandemic in the second quarter of 2021, and the deals look set to continue on an upward trajectory for the rest of the year, at least. The PSPC frenzy has been impossible to ignore, with the interest of PSPCs likely to continue to dominate mega-agreements, if not the majority of transactions.
Beyond 2021 and its unique post-crisis business climate, it is quite likely that the PSPC craze will subside in the industry, as the bulk of auto M&A deals continue to grow. involve a large number of joint ventures and strategic technology alliances of non-core combustion engine / powertrain assets, troubled agreements and supplier consolidation.
Whether through PSPCs or not, the industry will surely continue to attract high levels of trading activity as investors seek lucrative start-up potential, especially among CASE companies.