As market conditions improve, so do the big suppliers' horizons
The supplier industry in North America may be on the verge of a wave of M&A activity as major companies, flush with cash in a robust market, look to expand globally and use the current momentum to establish dominant positions in key technologies.
Major acquisitions have been few and far between during the upturn in the North American industry, and many executives still concede a reluctance to overextend in the event of another downturn.
But the tide appears to be turning, and in particular there is growing interest in high-tech safety technology suppliers. Also, private equity could be back in the mix.
A key signpost: BorgWarner management recently laid out for analysts a plan to double the size of the company by 2020, driven partly by acquisitions.
After a briefing from executives, JP Morgan reported that M&A “is a key focus area for both the firm’s management and its capital at present.”
“M&A is expected to be propelled by bolt-on acquisitions with a unique or complementary technology, although the potential exists for large acquisitions as well (although likely nothing ‘transformative’).”
Indeed, JP Morgan said it was “surprised to learn the extent of BWA’s acquisition initiatives” and that the supplier’s M&A strategy seemed among “the highest areas of focus for management currently; BWA expects to announce at least one material acquisition within the next 12 months.”
Executives said BorgWarner is looking at 30 potential targets, with combined revenue of $5 billion. It is in talks with four of them, and “in advanced stages of discussion with two,” according to JP Morgan.
“Management suggested many of the targets have a narrow regional focus, suggesting opportunity to lever a target’s products and technology across BWA’s broader global footprint,” according to the analysis.
Such strategies seem to be taking hold across the industry. A third of the auto industry executives who participated in a recent Ernst & Young survey said they expect to pursue an acquisition in the next 12 months, compared to 19% in October 2012. Over three quarter of the respondents expect the value of future M&A deals to be in excess of $50 million.
But so far this year M&A activity in North America has been modest. Among the recent exceptions:
*Federal-Mogul, which has struggled with losses in the past year, recently agreed to sell its connecting rod and camshaft business to JD Norman Industries, maintaining that the businesses did not fit in its long-term strategy.
*There also has been speculation around Johnson Controls’ attempts to sell its automotive electronics business. JCI, which put the $1 billion unit up for sale earlier this year, has talked to private equity firms about selling the business after apparently failing to generate buyer interest from rival auto parts suppliers.
Still, Visteon and Delphi are said to be interested in the unit, and Chinese supplier Huayu Automotive Systems is also said to be watching the proceedings closely.
*There also has been a report that Eaton Corp. is weighing a sale of its $1 billion auto-parts unit to focus on its power and lighting operations. The Bloomberg report – which said the company has had internal talks about seeking a buyer – has been denied by Eaton management.
The next wave of M&A activity may revolve around high-tech active safety features. For example, Sweden’s Autoliv, a leader in passive safety features, has said it is seeking acquisitions involving components such as electronic stability control and chassis technology that can help cars avoid accidents. But Chief Executive Jan Carlson said a few weeks ago that there are few companies willing to sell its sensors and radar businesses.
In some cases those companies are leveraging their technology to recruit new investors. For example, Amsterdam-based Mobileye N.V., which has supplied collision-avoidance technology to BMW and General Motors, says it has raised money from five investors – which it did not name – that totalled about $400 million.
Mobileye said it expects to sell two million driver assistance systems in 2013.
Copyright © 2025 S&P Global Inc. All rights reserved.
These materials, including any software, data, processing technology, index data, ratings, credit-related analysis, research, model, software or other application or output described herein, or any part thereof (collectively the “Property”) constitute the proprietary and confidential information of S&P Global Inc its affiliates (each and together “S&P Global”) and/or its third party provider licensors. S&P Global on behalf of itself and its third-party licensors reserves all rights in and to the Property. These materials have been prepared solely for information purposes based upon information generally available to the public and from sources believed to be reliable.
Any copying, reproduction, reverse-engineering, modification, distribution, transmission or disclosure of the Property, in any form or by any means, is strictly prohibited without the prior written consent of S&P Global. The Property shall not be used for any unauthorized or unlawful purposes. S&P Global’s opinions, statements, estimates, projections, quotes and credit-related and other analyses are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security, and there is no obligation on S&P Global to update the foregoing or any other element of the Property. S&P Global may provide index data. Direct investment in an index is not possible. Exposure to an asset class represented by an index is available through investable instruments based on that index. The Property and its composition and content are subject to change without notice.
THE PROPERTY IS PROVIDED ON AN “AS IS” BASIS. NEITHER S&P GLOBAL NOR ANY THIRD PARTY PROVIDERS (TOGETHER, “S&P GLOBAL PARTIES”) MAKE ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE PROPERTY’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE PROPERTY WILL OPERATE IN ANY SOFTWARE OR HARDWARE CONFIGURATION, NOR ANY WARRANTIES, EXPRESS OR IMPLIED, AS TO ITS ACCURACY, AVAILABILITY, COMPLETENESS OR TIMELINESS, OR TO THE RESULTS TO BE OBTAINED FROM THE USE OF THE PROPERTY. S&P GLOBAL PARTIES SHALL NOT IN ANY WAY BE LIABLE TO ANY RECIPIENT FOR ANY INACCURACIES, ERRORS OR OMISSIONS REGARDLESS OF THE CAUSE. Without limiting the foregoing, S&P Global Parties shall have no liability whatsoever to any recipient, whether in contract, in tort (including negligence), under warranty, under statute or otherwise, in respect of any loss or damage suffered by any recipient as a result of or in connection with the Property, or any course of action determined, by it or any third party, whether or not based on or relating to the Property. In no event shall S&P Global be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees or losses (including without limitation lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Property even if advised of the possibility of such damages. The Property should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions.
The S&P Global logo is a registered trademark of S&P Global, and the trademarks of S&P Global used within this document or materials are protected by international laws. Any other names may be trademarks of their respective owners.
The inclusion of a link to an external website by S&P Global should not be understood to be an endorsement of that website or the website's owners (or their products/services). S&P Global is not responsible for either the content or output of external websites. S&P Global keeps certain activities of its divisions separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain divisions of S&P Global may have information that is not available to other S&P Global divisions. S&P Global has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process. S&P Global may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P Global reserves the right to disseminate its opinions and analyses. S&P Global Ratings’ public ratings and analyses are made available on its sites, www.spglobal.com/ratings (free of charge) and www.capitaliq.com (subscription), and may be distributed through other means, including via S&P Global publications and third party redistributors.
