GCG’s Q2 2020 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 exhibited mixed overall performance in Q2 2020. The overall market as measured by the S&P 500 and Dow Jones Industrial Average restarted record-setting, positive trends in Q2 after one of the worst quarters in recent history. Interestingly, on a trailing 3-year period ending June 30, 2020, the S&P 500 and DJIA indices were up 24.2% and 17.2%, respectively (a return to their Q4 2019 levels). The Automotive industry underperformed the broader market across all segments. The industry was led by the Dealers and Service Providers, which had performed slightly below the overall market until mid-May and then ended Q2 in line with the DJIA at 15.1%. North America-based OEM suppliers ended Q2 down 16.7%, but showed relative strength compared to their foreign counterparts, which have been the worst performing segment since the segment’s peak in Q1 2018.
- In Q2 2020, middle-market M&A activity within the Automotive sector experienced year-over-year decreases in deal volume of approximately 46%. Deal value trends were more difficult to assess since, of the few deals in Q2, none disclosed valuation details. Strategic buyers drove overall deal activity, gaining significantly more share in Q2 as they did in Q1, reaching a high for the past five quarters and accounting for 100% of deal flow.
- Automotive Retail was by far the most active sector accounting for 59.2% 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 21.4% of automotive transaction volume in Q2.
- Select publicly traded companies representing the key sectors across the Automotive industry traded at an average multiple of 10.0x 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, a trend that has continued for the past few quarters.
Click here for the full update.