Angermann M&A International GmbH Global Automotive ... · Angermann M&A International GmbH Global Automotive Transaction Expertise ... new perspectives open up as well: ... After

Angermann M&A International GmbH

Global Automotive Transaction Expertise

„In the past, even the future was better.“

Karl Valentin (German comedian)

M&A International Inc. – the world‘s leading M&A alliance

� Introduction: New technologies as main market drivers

� German Automotive Industry: Positive prospects for sales in 2011

� Global Automotive Markets: Further growth expected

� Special: Future business models in the automotive market

� M&A International Inc. Automotive Group: Unique knowledge

provides best service

February 2011

Dear Valued Reader,

With the beginning of the new year, new perspectives open up as well: Experts believe that

global population growth and increasing urbanization will significantly determine the

development of automobiles in the future, regarding the size and configuration of cars as well

as regarding the business models of ownership.

Therefore industry consultants expect that urban planning will influence new car models and

prospectively work together with the automotive industry to find mobility solutions for the

conurbations. Efforts concerning low-emission zones and car-free inner cities are just the

beginning. In New York, for instance, it is planned to replace the famous Yellow Cabs by

models with alternative drives. In the United Arabian Emirates a purely ecological model city

named Masdar is developed as well.

2011 surveys of well-known consulting firms show, that the auto industry is heavily investing

in future technology, new products and safety improvements. In addition to these product-

related investments the focus is on alternative fuel technologies, specifically hybrid fuel

Introduction 2


related investments the focus is on alternative fuel technologies, specifically hybrid fuel

systems, battery electric power and fuel cell electric power.

The Automotive Group of M&A International Inc. represents corporate clients globally and

offers superior strategic advice to enable these companies to successfully pursue their goal

of enhancing their position around the world. All members of the Automotive Group of M&A

International Inc. are very proud of the success of our organization and the recognition that

our alliance is getting from the global corporate community. Our clients look at us for our

recommendations from executing detailed fairness opinions to achieving complex mid-market

buy-side and sell-side transactions on their behalf.

With a preeminent geographic footprint, a local presence in around 40 countries, a deep

insight of local practices, a strong corporate culture, a profound knowledge of the various

sectors of the automotive industry, a complete understanding of our client’s technology,

products, services and an appreciation of clients’ needs are the strengths that help drive our

success.

Dr. Michael Thiele

Managing Partner and Primary German Contact to the Automotive Group

German Automotive Industry 3

New Vehicle Registrations in Germany

December 2010 Jan –Dec 2010

Volume ± in % Volume ± in %

Cars/estates

New registrations 230.400 +7 2.916.300 -23

Of which:

German makes incl. group makes

159.200 +6 2.038.000 -19

Foreign makes 71.200 +8 878.000 -32

The German passenger car market recorded a full-year decline of 23.4 % to 2.91 million

newly registered cars, according to the latest set of data released by the KBA government

vehicle agency. Such an accelerated decline was to be expected after the massive increase

in 2009 as a result of the government's scrappage scheme. In contrast, car exports

increased by 24 % to 4.2 million units in 2010 and the VDA predicts a further export growth to

more than 4.4 million units this year. The domestic production, which in 2010 increased by

12 % to over 5.5 million cars is also expected to continue growing.

The domestic passenger car market will

recover, for 2011 a rise of more than 6 % to

3.1 million new registrations is predicted.

Besides that, the increasing demand for

commercial vehicles will positively affect

the business of bus, trailer and

superstructure manufacturers.

The positive development of the German

economy after the crisis is based in

particular on the strong industry and its

products internationally in demand. A


Exports 324.400 +11 4.235.000 +24

Production 413.500 +18 5.551.400 +12

Source: Verband der Automobilindustrie

The export surplus of the German automotive industry, from both manufacturers and

suppliers, represents two-thirds of all exports. Despite all the good figures for 2010 and the

optimistic outlook for the current year, there are remaining risks concerning the financial and

commodity markets. The exhaustion of fossil fuels, the world's growing energy demand and

the rapidly growing markets require substantial investments in new technologies. Additionally

there will be a new EU restraint for pollution in 2013 which will increase the price for the car

production.

Stuttgart: Daimler is celebrating it’s 125-year jubilee and simultaneously setting up a new

goal, namely to double sales to an amount of 1.5 million in five years. Furthermore Daimler

announced the upcoming “revolution” of the industry, which means the company plans to

present an new patent on drives. You may be curious – after all Mercedes-Benz made a

name for itself in technical innovations than hardly any other during the last 125 years.

products internationally in demand. A

significant part of the success was the

global orientation, 2010 the export was

about 46 % of the German economic

performance.

……… After an unparalleled downturn the

nnnn automotive industry is beginning to

recover. In December the sales were at the

peak of the year and the OEMS had a

considerable increase. Industry volumes

approached 12 million units in the U.S. in

2010, far below the peaks a few years ago,

Global markets: Europe & North America 4Europe: The passenger car market in the EU has fallen by 5.5 % year-on-year to 13.36

million million units during 2010, with a decline of 3.2 % y/y in the final month. The decline

is a result of the payback from the scrapping incentives that helped support some of the

biggest markets in the region during 2009. During 2011 a further fall in sales is expected, with

demand in the EU at this point, more than 2 million units below the markets pre-crisis

average. However, experts anticipate the market will recover to close to these levels by

around 2015 but almost 20 % of supplier revenues depend on China’s further development

(see next page). Therefore, western auto suppliers have to plan volumes very cautiously.

Additionally, OEMs are shifting production capacity more and more directly to China, which

means delivery volumes in Europe will be under higher pressure.


2010, far below the peaks a few years ago,

but well above the bottom of the curve.

Ford and General Motors are solidly

profitable and GM’s recent IPO raised

roughly 23 billion USD. Further, Toyota

appears to be recovering from its recall crisis

and Hyundai is gaining market share with an

impressive line of new products.

The turnover of SUVs and light trucks

increased in 2010 to 50 % of the entire sales

figures. German OEMs could also profit from

this revival of SUVs in the U.S.:

In 2010 Porsche was leading with a growing rate of +28.6 %; Audi (+23 %), VW (+20.3 %),

Daimler (+12 %) and BMW (+10 %) were following. Despite this good news, automakers and

suppliers still face significant obstacles to achieve sustainable profitability over the long term.

Competition is fierce and manufacturers are confronted with difficulties to close the cost gap

with advantaged global competitors and fulfilling quality specifications at the same time.

Experts expect U.S. auto brands to increase market share over the next five years, especially

spurred by product innovation, restructuring activities and continued improvement in product

quality. For this year sales figures of 13.5 million for light-vehicles are predicted.

Revenue structure of European auto suppliers

by parts delivery region

62 56

1815

55

7 14

8 6

0%

20%

40%

60%

80%

100%

2007 2010*

Rest of World

China

Japan

Nafta

Europe

Source: Roland Berger * estimated

Source: European Automobile Manufacturers’ Association

Passenger vehicle sales boomed in 2010, making the country the world’s second-

fastest growing market behind China. Additionally, the Indian market grew at the

fastest growing pace in sales of commercial vehicles, even ahead of China, mainly backed by

growth in the infrastructure and low vehicle penetration. India now accounts for 5 % of the

global auto production, compared to 2009 when it was only 1.4 %. According to the annual

survey of the SIAM, domestic sales registered a growth of 30.9 % with 14.8 million vehicles.

Production growth also increased by 32.7 %.

According to the CAAM, Chinese automobile production reached 18.2 million units

in 2010, an increase of 32 % compared to 2009. Sales in total were 18.0 million

units (+32.3 %), spurred by government incentives, economic growth, and a healthy dose of

pent-up demand. Although the economy in China is expected to grow further (on average

11 % per year), it will be faced with significant challenges such as currency appreciation,

unemployment and rising labor costs. Especially the surprisingly announced restriction of

new vehicle registrations to one-third will lead to a massive slump in sales. Last year there

were about 2.000 newly registered cars everyday on Beijing's streets and now there is a new

number of plates only by lottery - a kind of "Chinese Roulette" for potential car owners.

Instead of 800.000 new registrations in 2010, this year only 240.000 are allowed.

Global Markets: BRIC Countries 5


2010 started with a further negative trend for the car industry. In spring the

government decided to introduce an incentive scrap scheme, similar to those

implemented by Western European countries. As a result the market recovered to close the

year above 1.9 million sales. This is +30 % of the 1.4 million registered in 2009, but still very

far from sales record achieved in 2008 at 2.9 million The brand of the year in Russia was Kia,

jumped by 80 % and now 4th in the market. Until April 2011 a persistent growth is expected,

while for the second half of the year the growth will decline, assuming the government will not

extend the incentive period. Experts believe that the Russian market will not exceed the 2.3

million units in 2011.

During 2009 the Brazilian passenger car industry was one of the few in the world to

grow, considering the government did not support the market with any incentive.

2010 has been completed with a further growth of 3.5 million units sold (+ 11.9 % compared

to 2009) and consolidating the Brazil 5th position in the world. The reason for this are growth

in credit and in wages and the subsequent increase in consumer confidence. Experts

forecast a passenger car level at 3.1 million in 2011 and a total car market at 3.8 million that

will ensure Brazil being on the 4th position worldwide after China, US and Japan. Great news

for the dominating OEMs: In 2010 Fiat has achieved the market leadership, in spite the 8.000

units lost. The previous leader, Volkswagen, has lost 4 % or 25.000 units. GM grew by 11 %

and Ford did well with +12 %.

Asia & Global Markets6Car production in December 2010 gained 7.2 % year-on-year to 397.158 units,

hitting the record-high of the year, riding on the expansion of exports. Annual

production in 2010 saw a 21.6 % rise with a volume of 4.3 million vehicles. Annual domestic

sales in 2010 grew by 5.1 % to 1.46 million units. Annual exports in 2010 increased to an

amount of 2.8 million units or 29 %.The reason for this is, inter alia, the rising demand from

the U.S., based on the improved quality, reliability and brand image of Korean cars.

According to the Korea Automobile Importers and Distributors Association, foreign carmakers

will introduce around 50 new models to the local market in the course of 2011.

The production and export data for the last months in 2010 show a continued

deceleration in the global output growth. This is the result of hangover effects

following the withdrawal of the government's eco-car scrappage scheme and the restraint by

the strength of the Japanese Yen. Despite these pressures, the Japanese automakers are

expected to continue recording growth during 2011, which they have seen during 2010. Total

sales of passenger cars and commercial vehicles in Japan were at 4.96 million units in 2010,

a gain of 7.5 % from the previous year.

The global automotive market recovered faster than expected, especially at the

year-end it gained momentum. Sales of passenger cars grew in 2010 by 12 % to


year-end it gained momentum. Sales of passenger cars grew in 2010 by 12 % to

nearly 61.7 million, thereby going beyond the pre-crisis level. For 2011, a further growth by

8 % to 64.5 million cars is expected. On almost all markets except Germany and Western

Europe, demand and production have tightened considerably faster than experts have

predicted a few months ago. Growth drivers were primarily the BRIC countries Brazil, Russia,

India and China and the U.S. market.

Vehicle production worldwide (in million)

Source: VDA, OICA

2008change

in %2009

change in %

2010change

in %

USA 8.69 -20 5.70 -34 7.80 +37

China 9.29 +5 13.79 48 18.20 +32

Japan 11.58 -1 7.93 -32 9.65 +22

Germany 6.05 -3 5.21 -14 5.45 +5

Russia 1.79 +8 0.72 -60 1.15 +60

Brazil 3.22 +8 3.18 -3 3.50 +10

India 2.33 +4 2.63 13 3.49 +33

Korea 3.83 -7 3.51 -9 4.30 +23

World Market 70.78 -4 61.73 -13 75.69 +23

53%

24%

13%

10%

Shares in worldwide production

Japan

USA

China

Rest of the

world

Special: Future Business Models 7In the future there will be significant changes in the value chain of the automobile industry,

especially regarding the design of future business models. Traditional car dealers will be

amended by mobility service providers offering flexible usage and financial packages,

because they can better meet the needs of a younger generation.

Climate change, high traffic volumes in urban areas and new social values have changed the

image of cars - flexibility and the matter of expense are counting more than the ownership of

a car. Especially in cities with parking problems and entry restrictions customers are

switching to public means of transport or looking for new concepts of mobility. This is linked

to the demands of spatial flexibility on many employees. Carsharing is an increasing trend

among young and urban drivers. The idea is not to own one car but rent different ones

depending on the plans of the customer: small - maybe even electric - cars for the rush-hour

traffic in inner cities, vans for family trips and sports cars for the week-end. The providers

invoice the costs by using a flat rate for business trips and time tariffs for private trips. Heart

of the new business model is the service quality, availability, flexibility and user-oriented

prices for mobility offerings over all carriers. This means that for car manufacturers it is

crucial to restructure their brand segment which was so far based on technical differentiation

and start including a comprising range of services.


Mercedes has become a pioneer with its program called “car2go”. In Ulm/ Germany and

Austin/ USA customers can rent a car and leave it at the location of their choice. Via radial

search free cars in the surrounding area can be localized and directly booked from a mobile

device. In Ulm one out of three license holders between the ages of 18 and 35 is already

using “car2go”. With a market share of 64 %, the German railway DB is by far the largest

supplier: Stations will be available in 130 German

cities by mid-2011. Registered customers can rent the

cars by hour – at moderate prices: The starting price

of 20 EUR is fully taken in account as driving credit.

One hour is 1.50 EUR plus fuel costs of 0.20 EUR per

kilometer. Citroen is also active on the carsharing

market: In France customers can order cars by phone

or Internet and Citroen delivers them on the doorstep.

Country

car-sharing

customers*

vehicles in

carsharing*

Austria 11.000 169

Belgium 6.932 248

Denmark 5.000 225

Finland 2.232 38

France 13.000 700

Germany 137.000 3.900

GB 64.679 1.459

Ireland 23 9

Italy 13.208 498

Netherlands 27.000 1.832

Portugal 100 12

Spain 2.504 127

Sweden 14.889 492

Switzerland 84.500 2.200

Total 382.067 11.909

Source: carsharing.de * figures from 2009

Recent M&As 8While the last several years have been challenging for many industries, the automotive

industry was particularly affected. However, in 2010 the industry sector looked surprisingly

different. Worldwide mergers and acquisitions activity rose significantly: 10 % growth in

comparison to 2009.

Global economic conditions have led to a decline in overall activity and a focus on smaller

and more targeted activity for M&As during the crisis. Now that the market appears to be

improving, numerous automotive companies have stated that they are considering

acquisitions. In particular, the global deal market appears to be transitioning towards creating

and executing strategies for sustainable growth and value creation, with a lot of emphasis on

restructuring, divestitures and capital infusions. In contrast, 2009 was characterized by

unusually high disclosed deal value due to government-driven bailouts and the completion of

two megadeals conceived in 2008. This is the reason why year-to-year comparison shows a

decline in overall disclosed deal value.

Much of the M&A activity in 2010 came from the emerging markets (approx. 25 %) -

demonstrating the faster recovery from the financial crisis that was seen emerging markets

versus developed economies. Thus, Asia accounted for a large share of global disclosed deal

value. North America was mainly focused on its rightsizing and turnaround efforts, whereas

the European industry was pretty active in the deal market, as well.


D eal Size

In euro

Acquisition

100%

M AHAG

Automobilhandel

und Service GmbH

& Co. KG

Car dealer group M AHAG

Automobilhandel

und Service

GmbH & Co. KG

Volkswagen AG n.a. Germany Jan 10

Joint Venture Bosch Emission

Systems GmbH &

Co.

Exhaus gas

treatment

technology

- Deutz AG, Robert

Bosch GmbH,

J. Eberspächer GmbH

& Co. KG

- Germany June 10

Sale of

business unit

Freudenberg & Co.

KG

M etal gasket

business

Freudenberg &

Co. KG

ElringKlinger AG n.a. Germany Nov 10

Acquisition

100%

Plastal GmbH Plastic part

manufacturer

Plastal GmbH Faurecia Exteriors

GmbH

23-33 million Germany/ France Apr 10

Acquisition

100%

Fonderie Lorraine

S.A.

M etal die casting

services

Honsel AG ZF Friedrichshafen AG n.a. Germany/ France Jan 11

Acquisition

100%

C. Rob

Hammerstein

GmbH & Co. KG

Automotive Supplier C. Rob

Hammerstein

Group

Johnson Contro ls Inc. n.a. Germany/ U.S. Feb 11

Acquisition

100%

Volvo

Personvagnar

Holding AB

Automobile

manufacturer

Ford M otor

Company

Zhejiang Geely Holding

Group Co., Ltd

1.3 billion Sweden/ China Aug 10

Aquisition

100 %

Denway M otors Ltd. Investment ho lding

Services, M otor

Vehicles

manufacturer

Denver M otors

Ltd.

Guangzhou

Automobile Group

3.1 billion Hong Kong/ China Aug 10

M ajority

takeover

70 %

SsangYong

M otor

Automobile

manufacturer

SsangYong

M otor

M ahindra & M ahindra

Ltd.

340 million Korea/ India Nov 10

D ate C o untry D eal type T arget D escript io n o f

B usiness

Seller B uyer

Source: M&A Review

Representative Deals 2010/11 in the Automotive Sector with German or Asian involvement:

In the rapidly consolidating automotive sector, the experienced professionals of M&A

International Inc. provide critical global knowledge of opportunities and market conditions.

The M&A International Inc. Automotive Group provides you with:

� Unparalleled sector expertise in the leading automotive centers

� A cohesive team of 65 M&A professionals from all over the world are in constant

communication about the latest transactions and developments in the automotive industry

� Periodic industry reports give you key information at a glance

� Access to a worldwide network of buyers, sellers and sources of financing

� Just-in-time information due to a widespread network of offices at any economic hotspot

The German Automotive Group Team is a team of high-level senior advisors in M&A, all with

relevant industry experience and ongoing and very close relationships to many automotive

industry leaders:

M&A International Inc. Automotive Group 9


industry leaders:

Dr. Michael Thiele Dr. Hans Bethge Ursula Gruss

Managing Partner Managing Partner Senior Advisor

Focused on M&A in Automotive 30 years of experience in M&A 21 years at Daimler AG

& Aerospace with main focus on M&A

Martin Olczyk Dr. Michael Franck

Consultant Technology Expert

Expert on Automotive M&A 25 years at Daimler AG

with main focus on R&D

Automotive Group Specialists10

Africa: Yaron Zimbler Israel: Tomer Segev

Group Leader: USA-IL: S. Jack Campbell


Africa: Yaron Zimbler

Argentina: Hernan Sambucetti

Brazil: Gianni Casanova

Bulgaria: Ivaylo Spasov

Canada: Eva Grossman Hollander

Chile: Guillermo Arnaiz

China: Adrian Bradbury, Dr. Dana Schuppert

Czech Republic: Jana Hořáková

Denmark: Anders K. Ladegaard

Estonia: Heikki Källu

France: Jean-Paul Ortelli

Germany: Dr. Michael Thiele

Hungary: Kálmán Nagy

India: Suchismit Ghosh

Ireland: Raymond Donegan

Israel: Tomer Segev

Italy: Giovanni Panigada

Lithuania: Karolis Pocius

Netherlands: Adse de Kock

Poland: Maciej Szalaj

Romania: Andreea Mladin

Slovakia: Radovan Savolt

Slovenia: Jure Jelerčič

Spain: José María Romances

Sweden: Joakim van Heijne

Switzerland: Jens Rutten

Turkey: Ahmet Hamdi Hafizoglu

United Kingdom: Philip Barker, Tim Moore

USA: Alexander Mammen, W. Gregory

Robertson, S. Jack Campbell, Murray

M. Beach, Ralph M. Della Ratta, Jr.

Providing Automotive M&A Advisory Services on a Global Scale

M&A International Inc. Automotive Group 11



Established in 1985, M&A International Inc. offers the unparalleled, global resources of over 500 M&A

professionals operating in every major financial center of the world. We are closely linked and together

we advise our clients on acquisitions, divestitures and financing. We have closed over 1,400 transactions

totalingmore than US$85 billion in transaction value in the past five years.

Founders of the M&A Mid-Market Forum (www.midmarketforum.com) and the Strategic Acquirors Forum

(www.mergers.net/saf).

For any questions concerning this market report, please contact:

Dr. Michael Thiele

Managing Partner and Primary German Contact to the Automotive Group

AngermannM&A International GmbH

Bolzstrasse 3

D-70173 Stuttgart

Germany

Phone: +49 (0) 711 22 45 15 12

[email protected]

© 2011 Angermann M&A International GmbH. All rights reserved. M&A International and M&A

International Inc. refers to the alliance of member firms of M&A International, each of which is a separate

and independent legal entity.

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Angermann M&A International GmbH Global Automotive ... · Angermann M&A International GmbH Global Automotive Transaction Expertise ... new perspectives open up as well: ... After