PwC Deals Global Automotive Deals Insights Year-End 2017 In the driver’s seat: Automotive M&A pushes forward in 2017 Executive summary Global Automotive M&A activity was strong in 2017. Automotive “Investments in connected, M&A deal value is up 29.9% to $53.2 billion. Volume is up 2.6% autonomous, and electrification made to 598 deals, and the average disclosed deal size increased 31.9% to $278.6 million. headlines and drove Automotive M&A The increase in value and average deal size is primarily driven activity in 2017. Despite the risk by two megadeals in 2017 compared to zero in 2016. The two associated with these Auto-Tech megadeals were in Auto-Tech segment accounting for $23.3 investments, this trend will continue to billion of deal value, or 43.9% of all disclosed deal value in 2017. drive deal value in 2018.” We define Auto-Tech as investments in connectivity, autonomous, electrification, ride-sharing and the software, sensors, intellectual property and other components that support these trends. Auto-Tech deal value increased more Jeff Zaleski than fivefold from $5.3 billion in 2016 to $26.7 billion in 2017, Partner, US Automotive primarily due to both megadeals in 2017 being Auto-Tech Deals Leader related. Auto-Tech deal volume was up 28.0%, from 50 deals in PwC 2016 to 64 deals in 2017. US acquirers spent $23.6 billion in 2017, or 44.4% of disclosed deal value. With recent tax reform in the U.S. and the expected repatriation of cash, we expect US acquires to drive M&A activity in 2018. Trends and highlights • Volume growth in 2017 was driven by the Others sub- Global Automotive M&A deals by disclosed value sector while all value growth was driven by the 2011 - 2017 Component Supplier sub-sector. 250 1 450 ) $388 alue • Consolidation within the aftermarket and dealership 400 mn v 1 - ($ segments is racing alongside Component Supplier 200 2 2 350 eal 64 d 4 segment driving M&A volume. Dealerships accounted 40 - $279 300 150 41 56 55 for 26.4% of the total automotive activity, and 12.7% 250 value eal 37 40 d of activity related to transactions in the aftermarket disclosed 200 100 segment. Increased deal volume in the Others sub- of $214 $211 $186 150 sector was driven by aftermarket and dealer $161 isclosed $141 100 consolidation. 50 volume 50 176 147 117 138 116 138 134 • Value growth was driven by Component Suppliers, as deal Deal - - d Average value more than doubled to $40.7 billion in 2017. 2011 2012 2013 2014 2015 2016 2017 • Both megadeals transacted in 2017, and 60% of the <100 mn 100 mn - 5 bn > 5 bn Average deal size (R-Axis) top 10 deals, targeted Component Suppliers. Source: Thomson Reuters Highlights of 2017 deal activity M&A market activity improves Global Automotive M&A deal volume and value 2011 - 2017 Deal value and volume in 2017 outpaced 2016, with M&A 70 700 598 activity reaching the highest level since 2007 (604 deals). 594 591 583 ) 60 543 600 Total 2017 transaction value of $53.2 billion is up 29.9% bn 490 ($ 465 from 2016, while 598 deals were closed in 2017, up 2.6%. 50 500 The Component Supplier sub-sector continues to drive 40 400 volume M&A value growth while dealership and aftermarket value eal 30 300 Deal consolidation is fueling growth in M&A volume. 20 200 Local deals continue to be attractive and make up a large share of the deal volume, however, a majority of deal d Disclosed 10 100 value is attributable to cross border Auto-Tech deals. $44.9 $30.2 $21.7 $38.7 $62.1 $41.0 $53.2 - - 2011 2012 2013 2014 2015 2016 2017 Disclosed deal value Deal volume (R-Axis) Source: Thomson Reuters Largest Megadeals transaction $15.3B ($5B and over) 2 mega-deals Intel’s $15.3 billion acquisition There were two transactions of MobileEye – an advanced in 2017 exceeding $5 billion driver-assistance system (compared to zero in 2016 providing warnings for collision and four in 2015), making up prevention and mitigation, 43.9% of total disclosed deal accounted for 28.8% of total value. Both megadeals in disclosed deal value in 2017. 2017 were Auto-Tech related. Automotive assembly According to PwC Autofacts, the industry is expected to add 20.4 million units of production between 2017 and 2024 for a compounded annual growth rate (CAGR) of 2.8%. The majority of this growth stems from China with a contribution to growth (CTG) rate of nearly 43% (or 8.7 million units), followed by India with a CTG rate of nearly 12% (or 2.4 million units). Global light vehicle assembly outlook 2004 - 2024 120 900 110 800 100 90 700 (millions) 584 594 604 594 591 583 598 80 549 520 543 600 515 532 70 490 volume 465 500 volumes 60 50 400 Deal 40 300 Assembly 30 58 63 65 69 66 58 72 75 80 84 86 88 93 94 98 103 107 109 111 113 114 20 200 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Global light vehicle assembly outlook Automotive M&A deal volume Source: PwC Autofacts 2018, Q1 Release PwC Deals Global Automotive Deals Insights Year-End 2017 2 Highlights of 2017 deal activity (cont.) Transaction multiples Transaction multiples (median) 2015 - 2017 Disclosed transaction multiples for the automotive industry varied in 2017. The implied EV/EBITDA 1.5x 11.5x 12.0x multiples for automotive transactions announced increased from 8.2x in 2016 to 9.6x in 2017, respectively. 11.0x Additionally, the implied EV/Revenue multiples for 1.0x 9.6x 10.0x automotive transactions announced stayed relatively Revenue consistent, dropping slightly from 1.2x to 1.1x in 2017, 8.2x 9.0x EV / EV 0.5x EBITDA / EV respectively. 8.0x Multiples are not available for all deals and historically 1.4x 1.2x 1.1x 0.0x 7.0x may get revised as subsequent information becomes 2015 2016 2017 available. Although reported EBITDA multiples are higher for 2017, as more information becomes available, we EV / Revenue EV / EBITDA believe valuation multiples were flat to declining in 2017. Source: Capital IQ Venture capital activity Global venture capital deal volume and value for all industries increased in 2017 by 10.5% and 49.5%, respectively. With 11,042 deals completed worth $164.4 billion, 2017 was a record-setting year for venture capital. While the Auto-Tech sector is only a small portion of global venture capital, venture capitalists are showing interest in investing in early stage enterprises focused on artificial intelligence, software, and other technologies in and around the mobility eco-system. Two Auto-Tech areas are receiving noteworthy capital from investors: • On-demand transportation applications – Received over $2.5 billion in venture capital funding in 2017 for the fourth consecutive year. Lyft raised approximately $1.5 billion in 4Q17 alone, evidencing increased interest in ride sharing and autonomous vehicle programs. • Electric and autonomous vehicles – The most notable recipient of venture capital funds this year is NIO, a Shanghai-based start-up focusing on designing and developing autonomous and premium electric vehicles, that raised $1 billion in 4Q17. Along with Component Suppliers and vehicle manufacturers, venture capitalists are also focusing on alternative powertrains that will drive the future of the automotive industry. The car of the future will be electrified, autonomous, shared, and connected. Venture capitalists will continue to play an integral role of reshaping the automotive industry by injecting cash in early stage technologies and business models. Source: CB Insights MoneyTree Report Auto-Tech trends 2017 Auto-Tech deal volume (64 deals) Significant investments are being made in alternative powertrains, autonomous vehicles, ride sharing/mobility services, and online vehicle dealerships/trading Tech acquiring tech platforms. Not only are traditional automotive companies 41% acquiring tech companies, tech companies are acquiring Tech acquiring non-tech 53% traditional automotive companies and other Auto-Tech Non-tech acquiring tech focused companies. Deal value increased over fivefold from $5.3 billion in 6% 2016 to $26.7 billion in 2017, as both megadeals in 2017 were Auto-Tech related. Deal volume increased 28%, from 50 deals in 2016 to 64 deals in 2017, primarily 2017 Auto-Tech deal volume by sub-category (64 deals) driven by Component Supplier activity. In 2017, the main focus in Auto-Tech were driver assistance technologies 11% Alternative powertrains and alternative powertrains, which includes lithium ion 3% Connected car battery manufacturing. In Asia, alternative powertrain 8% companies were attractive assets in auto-tech, 42% Autonomous vehicles comprising 16 deals. The US, Europe, and ROW regions 11% Online dealerships/trading were the most targeted regions for driver assistance technologies. Ride sharing Other Trade buyers dominated Auto-Tech deal activity, 25% transacting 84.4% of Auto-Tech deals, compared to 15.6% of deals transacted by financial buyers. Source: Thomson Reuters PwC Deals Global Automotive Deals Insights Year-End 2017 3 Sub-sector highlights and outlook Sub-sectors highlights While differences within the sub-sectors exist, each continues to see trends around expansion of technologies, consolidation, and expansion in emerging markets. Component Suppliers Component Suppliers M&A activity 2011 - 2017 The Component Suppliers category includes companies who sell 45 350 products to be used in the manufacturing of vehicles. With deal value of $40.7 billion, the strong performance of Component Suppliers 40 303 300 marks an all-time high, compared to the last 15 years.