M&A Update | Automotive Supplier H2-2017

Automotive supplier industry overview and indicators Baker Tilly Capital, LLC’s automotive supplier M&A newsletter provides an overview of the North American automotive supplier sector, including recent performance and North American M&A trends. Following seven years of growth, new light vehicle sales in the U.S. fell 1.8 percent to 17.2 million units in 2017. There is optimism that this decline will be stabilized in 2018 because of the sales momentum built toward the end of 2017 and the potential favorable impact the income tax cuts are expected to have on the economy. Pressure from the off-lease vehicles and the used vehicle market will remain, but is not expected to have a material effect on volume. The wildcard for the year is the future of the North American Free Trade Agreement (NAFTA) and potential impact from steel and aluminum tariffs. JD Power and LMC Automotive forecast 2018 total light-vehicle sales to be 17.0 million units, a decrease of 1.3 percent from 2017. Retail light-vehicles are expected to reach 13.8 million units, a decline of 1.5 percent from 2017. The SUV segment is expected to grow another 3 percent in 2018 to a 45 percent market share while cars will remain under pressure with volume expected to drop 6 percent to a 33 percent share of market. A significant trend in the M&A market is the continued acquisitions by technology companies of businesses in the auto-tech segment. This segment is defined as any company that produces products for autonomous vehicles, connectivity, electric vehicles and vehicle software. Intel’s $14.2 billion acquisition of Mobileye highlights this trend. Intel’s strategy is to combine the resources of both companies to create automated driving solutions from the cloud to the car. Intel estimates the vehicle systems, data and services market to be a $70 billion market by 2030. Select public company metrics Baker Tilly Capital reviewed publicly traded companies in the automotive supplier industry. The companies selected supply original equipment manufacturers (OEMs) in North America. The identified comparable public companies are trading in a fairly wide range with EV/EBITDA multiples from 5.0x to 15.8x and a total industry mean of 8.1x as of December 31, 2017, which is the highest industry mean multiple since the second quarter of 2015 when it was 8.6x. Furthermore, the average EV/EBITDA has steadily improved in line with the S&P 500.

Table 1: Comparable public company analysis – Select automotive suppliers to OEMs in North America

Enterprise

LTM

LTM Gross Profit

Enterprise Value / LTM

Total Debt

3-Year Hist. Revenue CAGR

LTM

EBITDA Margin

($ in millions)

Company Name

Exchange

Headquarters

Value

Revenue Gross Profit EBITDA Margin

Revenue EBITDA EBITDA

Adient plc

NYSE:ADNT

Ireland

9,244 5,278

16,391

1,315 1,144 2,623 2,149 2,120 1,398 1,831

1,073 1,048 2,091 1,279 1,630

8%

7%

0.6x 0.8x 2.1x 1.3x 1.2x 1.9x 1.3x 1.1x 0.7x 0.7x 2.4x 0.5x 3.2x 1.3x 0.8x 0.9x 1.0x 0.6x 0.8x 0.6x 0.5x 0.8x 1.9x 0.8x 0.3x 1.3x 0.4x 0.8x 1.5x 0.4x 0.8x 1.1x 2.4x 1.1x 0.8x

6.0x 5.7x

3.3x 3.8x 2.0x 1.0x 1.3x 1.3x 2.4x 0.6x 1.7x 2.5x 1.6x 1.3x 0.1x 1.0x 3.5x 1.6x 1.2x 0.9x 1.3x 0.9x 1.7x 2.6x 9.5x 1.3x 2.5x 7.0x 2.0x 2.7x 2.3x 1.9x 0.0x 1.3x 2.7x 2.1x 1.7x

0.0%

American Axle & Manufacturing Holdings, Inc. NYSE:AXL

United States United Kingdom

6,266

18% 20% 21% 22% 48% 41% 26% 19% 15% 34% 10% 39% 32% 41% 28% 12% 16% 15% 17% 17% 26% 27% 11% 16% 24% 27% 12% 19% 14% 31% 22% 20% - 9%

17% 16% 12% 17% 18% 14% 15% 12% 11% 17% 35% 15% 10% 13% 10% 16% 10% 10% 8% 9%

19.2% -6.0%

10.6x 10.2x

Aptiv PLC Autoliv, Inc.

NYSE:APTV NYSE:ALV NYSE: BWA

26,617 13,578 12,248

12,884 10,383 9,799 2,893 4,472 3,618 7,209 2,578 52,845 24,234

4.0% 5.7%

Sweden

8.0x 9.6x 8.5x 7.4x 5.9x 7.5x 6.6x 9.0x 8.1x 7.2x 6.7x 7.0x 6.3x 5.5x 5.5x 5.2x 8.8x 8.9x 5.2x 5.0x

BorgWarner Inc. Brembo S.p.A.

United States

525 645

BIT:BRE BME:CIE DB:CON

Italy

5,514 5,935

11.4% 19.0%

CIE Automotive, S.A.

Spain

Continental Aktiengesellschaft Cooper-Standard Holdings Inc.

Germany

57,840 2,420 5,286 6,159 5,657 1,258 7,651 12,134 11,284

13,658

7,927

8.4% 3.7% 2.9% 1.3% 6.1% 9.3% 6.7% 9.6%

NYSE:CPS NYSE:DAN NYSE:DCI

United States United States United States

671

446 787 431 623 143 989

1,076

Dana Incorporated

15.9x

884

Donaldson Company, Inc.

1,909

2,540

Faurecia S.A.

ENXTPA:EO France

Gentex Corporation Gentherm Incorporated Gestamp Automoción, S.A.

NasdaqGS:GNTX United States NasdaqGS:THRM United States

1,795

695 311

986

BME:GEST LSE:GKN

Spain

10,002 13,072

4,130

1,112 1,048 2,103

11.5%

GKN plc

United Kingdom

-

HELLA GmbH & Co. KGaA

DB:HLE

Germany

7,935

8,145

2,274 2,365

7.5% 4.9%

Lear Corporation

NYSE:LEA TSX:LNR TSX:MG TSX:MRE NYSE:MOD

United States

13,240

20,467

819

16.2% 4.2% 0.8% 9.9% 8.3% 5.0% 3.4% 7.5% 3.4% -5.4% -0.8% 2.6% 13.4%

Linamar Corporation Magna International Inc. Martinrea International Inc.

Canada Canada Canada

4,397

5,220

861

22,010

38,946

5,688

4,020

1,472 1,602 1,154

2,943 2,025

498 345 161

308 190

9%

Modine Manufacturing Company

United States

14% 17%

NN, Inc.

NasdaqGS: NNBR United States

620

86

2,827

Schaeffler AG

DB:SHA

Germany

14,014

16,836

4,618

Shiloh Industries, Inc.

NasdaqGS: SHLO United States

363

1,042

118

73 98

7%

10%

12.7x

1,225 4,045

935

83

Superior Industries International, Inc.

NYSE:SUP NYSE:TEN

United States United States

Tenneco Inc.

9,274

1,503 3,698

710

8%

6.8x 6.2x

The Goodyear Tire & Rubber Company

NasdaqGS:GT United States

11,773

15,377

2,137

14% 14% 10% 11% 16% 13% 12% 9%

11.3x

427 203

3,004 1,988

810 245

The Timken Company Tower International, Inc.

NYSE:TKR

United States

4,369

5.0x 7.8x

NYSE:TOWR United States

813

Valeo SA

ENXTPA:FR

France

18,064

22,274

4,171

2,345

11.0x 15.4x

6.8% 5.0% 6.2% 5.7%

Visteon Corporation WABCO Holdings Inc.

NasdaqGS:VC United States

3,588 7,817 9,272 5,935

3,146 3,304

436

293 526

NYSE:WBC

Belgium

1,028 2,045 1,230

$

10,151

$

$

1,238

8.1x 7.4x

$

Mean Median

787

6,266

Source: Baker Tilly Capital Insights and Capital IQ (as of March 9, 2018)

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