GCG’s Q4 2019 Automotive Industry Update provides an overview of the latest trends in the sector, including recent performance, valuation multiples and the state of the middle-market M&A environment.

Key findings include the following:

• • The U.S. equity market maintained strong overall performance in Q4 2019. On a trailing 3-year period ending December 31, 2019, the S&P 500 and DJI indices were up 42.3% and 43.5%, respectively. The Automotive industry under performed the broader market across all segments. The industry was led by the Dealers and Service Providers segment with gains of 31.3% over the 3-year period. North America-based OEM suppliers have also shown strength, unlike their foreign counterparts, which have continued to under perform since the segment’s peak in Q1 2018.

• • In Q4 2019, middle-market M&A activity within the Automotive sector experienced year-over-year decreases of approximately 22% and 79% in deal volume and value, respectively. The average deal value of $45 million is the second smallest of 2019. Strategic buyers continue to drive overall deal activity, although financial buyers are gaining share and reached a high for the year, accounting for 13.9% of deal flow.

• • Automotive Retail remains the most active sector, accounting for nearly 54% of total automotive transaction volume. This can be attributed to the ongoing consolidation among dealership groups. Auto Parts and Equipment exhibited continued strength as well at 27% in Q4 2019.

• • Select publicly traded companies representing the key sectors across the Automotive industry traded at an average multiple of 9.9x EBITDA and 1.4x revenue. Trading multiples varied significantly across and within the four categories with the strongest multiples observed in the Dealers and Service Providers segment.

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