Mergers and Acquisitions (M&A) have significantly evolved the needs of the industries over time and have played a key role in the structural formation of the physical footprint of the industry, as we see today. Over the recent years, there has been a particular increase and the scope of M&A transactions and deals in two sectors – namely the industrial manufacturing and the automotive sector. This blog aims to analyse the key strategies of M&A and their importance in the industrial manufacturing and automotive sector. Further, the blog analyses their trend between 2019 and 2021 and concludes by providing details about the paradigm shift that India, in particular, shall face through these industries.


M&A transactions in the automotive industry of the 1990s mainly existed due to overcapacity, and their growth was driven primarily by the increased product ranges and the economies of scale. Slowly and steadily, emerging markets became promising investment ventures for companies, especially for countries like Brazil, Russian Federation, India, and China (BRIC), that wanted to establish their global presence and reduce production costs.

It is safe to say that for years, the automotive and manufacturing industry played down the potential of M&As. Now that these industries face the long-standing effects of the COVID-19 pandemic, it becomes pertinent to synthesise the innovation capabilities of manufacturers and suppliers and augment them with newer technologies.

Growth and expansion do not have to be limited to two major automobile giants coming together or a large company acquiring a smaller one; it can be achieved via inorganic means as well. To position themselves better to compete in the electric vehicle market, the global carmakerStellantis N.V entered into a joint venture with South Korean Samsung SDI to produce electric vehicle battery cells and modules to capture the North American market. Stellantis’s strategy to work with Samsung is a step towards revolutionary changes such as electrification and digitisation of automotive on a faster cadence.

Intending to enter into the automotive portfolio, leading chipmakerQualcomm teamed up with SSW Partners to acquire advanced driver assistance system (ADAS) technology provider Veoneer. While Qualcomm boasts of ‘Silicon Valley Technologies’ such as integrated circuits and global positioning system (GPS) products, Veoneer has established itself in the ADAS market. This acquisition will provide Qualcomm with a strong foothold in driver assistance technology and broaden its customer base.

These two examples are symbolic of the fact smart partnerships (Silicon Valley giants partnering with European billion-dollar automotive companies) are powerful inorganic tools to establish expansion across industries and geographies.
Before we analyse some major M&A trends in the automobile and manufacturing industry, let us note some of the key strategies to make the most of the business dynamics:

1. Merger to capture the growing market
The strategy should be to become an all-inclusive solution provider harmonising capabilities in segments so as to make a place in the growing market. French car parts companyFaurecia’s takeover of Japanese car navigation system maker Clarion was an attempt to keep up with the advent of new technologies such as autonomous driving and electric vehicles and build a ‘cockpit of the future’. Faurecia aims to lead the cockpit electronics segment using sensor technology and artificial intelligence.

2. Capturing the shrinking markets
Slowly increasing scale by horizontally merging with suppliers with the same economies of scale and synergies. This approach helps cover the lack of one another while creating room for operational and financial synergies. German auto supplier- ZF sold itsGlobal Body Control Systems Business Unit to Luxshare to carve out in a declining market. ZF viewed Luxshare as strategic growth, while for Luxshare, investing in ZF posed a strategy to become a global leader in the automotive interface solution market.

3. A steady post-merger integration phase
It is essential to avoid major post-merger pitfalls such as insufficient resources for integration, ambiguous communications, lack of execution, and indecisive leadership. Therefore, a comprehensive integration plan should be laid out in a realistic time frame and leaders who can guide through the destabilisation period are key to a successful merger.

4. Cultural compatibility
Aligning cultures should be a priority for a deal to be successful. Cultural clashes emerge when either party fails to recognise each other’s cultures or does not take preliminary steps to accommodate one another. The automotive industry has previously seen deals failing to achieve their promised value due to cultural issues, such as theDaimler-Chrysler merger and theNissan and Renault merger.

Mergers and Acquisitions have increasingly focused themselves on their purposeful collaboration with the technology and platform-sharing agreements. According to a study conducted by the Boston Consulting Group (BCG), there had been a drastic increase in M&A activity in 2018 and 2019 beginning; however, the activity has remained stagnant since then. Current activities are driven mainly by the need to find shortcuts to scale and growth, innovations, to sell assets that are no longer fit for the company strategies, to further expand to new services and products, and to meet the demands of the shareholders. Such mergers and acquisitions activities includethe Original Equipment Manufacturers (OEMs), along with components suppliers, manufacturers, and technical companies.

Importance of M&A in the Industrial Manufacturing and Automobile Industry

The automobile industry has been mainly driven by the demands of the consumers and the increasing technological advancements. This has raised the complexity of the environment around the automotive industry, along with tightening the competition. In such a scenario, M&A is a tool that helps in the growth and expansion of the business. It helps in accommodating new market requirements, which in turn helps in the generation of profits.

To safeguard their businesses, the automotive players use the M&A strategic technique, wherein companies undergo such transactions after proper due diligence. In some cases, certain automobile entities prefer merging with their competitors in order to fill the technology portfolio gaps.

M&A, for many years, has played a major role in the automobile industry and its development. This M&A industry is one of the most substantial and active markets, considering the volume and number of transactions. This is due to the consolidation of suppliers and manufacturers in the last few decades, which was mainly provoked by thetightening of the competition with globalisation.

On the other hand, M&A transactions in the manufacturing sector were most dominant in 2019, wherein thesector contributed to more than 13% of the total deal values across various sectors, as disclosed by the parties. While pursuing mergers and takeovers in the manufacturing sector, the manufacturing companies mostly cited portfolio expansion through services and products, geographic expansion, and consolidation as rationales. Further, the companies were focused ongaining new R&D capabilities and technologies with an aim to expand market shares and enter new markets.

Fewkey themes that drive M&A activities in the automotive and manufacturing sectors are:

(1) Digital transformation accelerated due to COVID-19, leading to industry convergence
Even though the adoption of technology is far from being a new trend for automotive and industrial manufacturing companies, however, the transformation has been accelerated with the presence of the COVID-19 pandemic. Increasing digitalisation has now allowed the companies to access new revenue streams, along with providing an opportunity to improve operational efficiency. This is why across business sectors, companies are embedding sensors and software into their goods, along with adding data analytics products to their portfolios.

(2) Increased availability of capital
This has resulted in the bolstering of M&A activities. Banks have once again started lending, and private equity (PE) has been significantly deploying ‘dry powder’. The Special-Purpose Acquisition Companies (SPACs) of the US have greatly risen in acceptance, leading to some of the largest deals in the industry. Typically, high-performing assets in tech-enabled segments are targeted by SPAC.

(3) Environmental, Social and Governance (ESG) performance in focus
Some of the particular areas of focus for International Mergers and Acquisitions (IM&A) include health and safety, energy use, diversity and inclusion, and supply chain resiliency. The construction and engineering industry, in particular, expresses an increased demand for energy-efficient and sustainable structures. Such demand does result in an increase in the direct costs, but companies must build such structures to remain in the competition. Over the years, there have been various private equity firms that have established their own ESG criteria for potential M&A transactions. This is because if assets perform poorly from the perspective of ESG, they have higher chances of declining in value due to smaller bidder pools.

(4) Commodity prices
With the recovery of the commodity prices in the past few months, the leading corporate leaders, while monitoring signs of inflation, are rethinking their policies and strategies related to sourcing and pricing. Such a strong rebound in industrial activity has had an adverse impact on the availability of raw materials, delays in delivery, disruption in the organised supply chains, and an increase in transportation costs.

Industrial Manufacturing and Automotive Sectors Deal Volumes and Values, 2019-2021

International Mergers and Acquisitions have experienced an increase in the volumes and values across all sectors, post recovery from the pandemic. 2021 saw the most deals in Europe, the Middle East, and Africa (EMEA), wherein they recorded around 42% higher deals than 2020, with 5,000 deals. America had the highest deal values to almost US$300 billion, with an increase by 144% between 2020 and 2021. Most of the US megadeals had a deal value greater than US$5 billion. The top 3 IM&A deals, as announced in 2021, included mergers with SPACs, highlighting that the automotive sector, in particular, is gaining importance in M&A. Approximately 41% of deal values and 36% of deal volumes in 2021 were related to Private Equity (PE), which saw an average increase from 26% to 34% in comparison to the previous five years.

Global M&A Industry Trends and Expectations in Industrial Manufacturing and Automotive Sectors

Aerospace and Defence

  • The Airline had pledged for net-zero emissions to be achieved by 2050. However, such ambitious plans would require M&A focused fuel efficiencies to be discussed in 2022 and beyond. Major players in the field have commenced investments in the development of planes that are capable of flying on sustainable aviation fuels, including hydrogen combustion, biofuels, and other cell technologies capable of reducing carbon emissions.
  • With an increased outlook of OEMs to secure suppliers, the focus is expected to shift towards supply chains, which shall now drive a significant percentage of deals. However, players facing liquidity issues or those that are small or midsized may become targets for reorganisation and consolidation in the process.
  • Tech-driven M&A transactions in the defence sector (mainly in hypersonic and precision engineering, cybersecurity, and autonomous systems) are expected to dominate the market with “bolt-on” acquisitions. Further, portfolio optimisation driven deals are anticipated, considering many companies are reinvesting their assets in emerging technologies.
  • Higher budgets for the defence sectors are further expected to create promising conditions for M&A transactions, considering the heightened geopolitical tensions around the globe. However, this may also result in less inbound investment activity with increased regulatory scrutiny.


  • The ability of OEMs to meet increased demand for vehicles through scale production seems to be hampered due to a shortage of skilled labour and supply chain disruptions. To be particular, the shortage of semiconductors has led to challenges for the automotive sector. Companies are expected to use their dealmaking powers in 2022 and beyond to produce developments for the future.
  • With an increasing demand for Electric Vehicles (EVs), strong M&A transactions are expected to increase. Further, trends from 2021 mergers between early-stage automotive companies and SPACs, with a particular focus on EVs and Autonomous Vehicles (AVs), is expected to continue.
  • As R&D departments of companies shift their focus on electrification, digital transformation deals (including but not limited to connectivity, software, customised chips, fuel cell technologies, EV battery, and charging infrastructure) are expected to further grow.
  • It is likely for OEMs to enter into joint ventures to help in gaining access to scarce components, such as semiconductors, and help in the sharing of R&D expenses burden. Improvements in charging infrastructure shall require alignment with governments as well.

Recently, the autonomous, connected, shared, and electric (CASE) vehicles, due to their technological advancements, have disrupted the traditional business models. M&A transactions are being utilised by automotive and non-automotive companies to access intellectual property, critical talent for profitability, innovation, and sustainability in business.

Today automakers can either acquire high technology providers to compete in the market or transform themselves into software developers, while especially looking at examples like Google, Uber, and Apple that are quickly capturing the technology and software space of the automotive industry. The automotive supply chains have seen an entry of consumer electronics companies through the acquisition of auto tech companies.

To provide an example,Samsung $8 billion acquired Harman, with an aim to fulfil the major requirements of autonomous vehicles and build assets in electronics. Acquisition opportunities are being explored by OEMs to save production costs and increase innovation in-house.

With more clarity on the profit potentials in CASE technologies, increased partnerships, investments and M&A transactions by industry participants to advance their respective market positions are expected.The joint venture of Daimler and BMW is further expected to change the shared mobility space landscape.

The main aim is to use the existing capacity of the acquired firm to save R&D product enhancement.Auto OEMs are expected to look for more vehicle manufacturing sector JVs and mergers, to increase market share, profit margins, and strength in the emerging technologically advanced markets.

The Peugeot S.A. Group and Fiat-Chrysler completed their merger in January 2021 and formed Stellantis, which today is the world’s 4th largest automaker company, such that it now competes with rivals such as Volkswagen and Toyota. This$52 billion deal between the French and Italian-American automakers took a year to get finalised while simultaneously struggling with the COVID-19 disarray. Further, M&A transactions have played a major role in the growth strategy of the Volkswagen Group. Today, the group consists of 12 brands in total, includingVolkswagen, ŠKODA, Audi, Bentley, SEAT, Porsche, Lamborghini, Scania, Volkswagen Commercial Vehicles, Ducati, and MAN.

We also have the acquisition ofJaguar and Land Rover by Tata Motors, which today are the two most iconic British brands.

The combination of M&A and technological innovation has led to an acceleration of growth of the automotive sector, along with a competitive edge for the companies interested. The best example is Toyota, which brought significant changes to the automobile manufacturing landscape through the introduction oflean-manufacturing and Just-in-Time (JIT) Production principals.

Toyota and Suzuki had bought a few stakes in each other’s business in 2019. While Toyota bought 4.94% stakes in Suzuki’s stocks, which amount to $907 million, Suzuki bought Toyota stock worth $453 million. This was built on the Suzuki-Toyota collaboration in February 2017. This collaboration has led to an increase in the manufacture of electric and crossover models, self-driving innovations, and sharing cars. In India,Toyota Kirloskar Engine propelled the Glanza premium hatchback prior to this year, which may be a re-badged form of the Maruti Suzuki Baleno.

Mahindra & Mahindra (M&M), the Indian SUV master, and Passage Engine Company, joined together in Rs.1,925 crores deal in October 2019 and created, conveyed, and showcased the American automaker vehicles in India.

The Indian automobile industry contributed about 7.5% to the overall GDP of the country, along with contributing about 49% to the country’s manufacturing GDP. About 35 million people are employed in this sector’s value chain. This industry is further expected to grow with a compound annual growthrate of 12.7% between 2019 and 2026, eventually reaching a net worth of $512 billion in 2026. The last decade, especially, saw the tripling of the production of two-wheelers in India, along with a doubling of the production of commercial and passenger vehicles.

Engineering and Construction

  • With an increased demand for building materials, engineering and residential construction, the engineering and construction (E&C) sector’s deal activities are expected to remain strong even in 2022 and beyond. The need for the retrofitting of existing domestic and office buildings and new construction has intensified with an increase in digitalisation, remote working and sustainable construction.
  • With an increased pressure on the margins of raw material prices (such as fabricated steel, timber, and cement), wage inflation (due to labour shortages, especially the new technology experts and specialised engineers) and transportation costs, 2022 expects higher costs and inflationary headwinds.
  • E&C companies have now shifted their focus on more cost-saving methods ad investments made through R&D and M&A to achieve digital competitiveness (automated and connected constructions) and a green future. The E&C portfolios will need to be diversified through investments in high growth areas and divestment in non-core assets.
  • The ESG regulations and targets on E&C firms are expected to change the demand and supply for new buildings. The E&C companies that responsibly focus on sustainability and raw materials that reduce carbon emissions, self-sufficient buildings, off-site construction companies and smart city infrastructures are expected to be better acquisition targets than others.

Industrial Manufacturing

  • 2021 saw an increase in the industrial manufacturing activity, despite supply chain disruptions and inflationary headwinds, which shall further M&A activity and transactions in 2022 and beyond. Industrial manufacturing players are expected to pursue capabilities-driven targets and acquisitions that shall help in building a greater supply chain resilience.
  • Some focus areas for business leaders shall include cost efficiency, technological and innovative capabilities, digital development, additive manufacturing, green competencies (ESG) and industrial automation.
  • The reinvestment of capital in green and digital capabilities, along with divestment of non-core assets, are expected. Automotive component manufacturers or manufacturers using carbon-intensive production techniques shall have to either find exit strategies or transform their business towards sustainability.
  • The capital (including SPACs, PE firms, public-funded investments and corporate balance sheets) can foster reindustrialisation in under-developed regions of large economies, such as Middle East and Africa (EMEA), Europe, and North America.

The Next Paradigm Shift in India

Even though technological innovations and M&As have been driving through the automotive industry in the past, a paradigm shift is expected to be seen in the industry in the near future, which is through the transition to EVs.EVs, being the future of mobility in the world, are further expected to accelerate the growth of M&As and technological innovations.

EVs remain to be at the early stages of development in India. This allows several participants in the industry the opportunity to lay solid foundations for future growth. Moreover, many global players aim to enter India to build a new market base; however, they too shall require the assistance of infrastructure, vendor network, R&D facilities, first and foremost.

The Central Government, through the FAME-II scheme modification in June 2021, have increased the electric subsidies by 50%, along with incentives for all-electric 2-wheelers to 40% of the total vehicle costs. Such initiatives, in addition to the State government subsidies, are expected to become a boon for the Indian EV automotive industry. Through government support in the adoption of EVs, India is soon expected to become the next big EV manufacturing hub. This shall be complemented through other factors of low maintenance and zero-emission, low running costs, and a more subsidised framework.

The mass scale adoption of EVs is enhanced further through battery price reductions and the range travelled per charge.

Technologies such as Nickel Metal Hydride, Lead Acid, and Nickel Cadmium do not have a significantly better substitute for Li-ion, which presents a wider range of power-energy performance. However, better substitutes for Li-ion composition in the form of Fuel Cells and Li-Sulphur is the next big change that shall accelerate the adoption of EVs in India. This change shall reduce the EV costs and provide faster time and range to market.

The economic arguments against EVs have weakened through the falling battery prices, resulting in stronger policy support. In fact, OEMs have commenced taking bets for EV space, and the domestic ancillary industry for battery pack manufacturing has started taking shape.

The four critical components that are expected to enhance the adoption of EVs in India include – (i) cost of battery; (ii) policy; (iii) infrastructure; and (iv) ability to locally procure the supply chain.

Considering that most startups in India are still trying to build the right product for the Indian audience, scalability and maturity in the EV industry have not been reached. Once maturity is achieved, increased M&A activity and transactions shall further be achieved either through large OEMs acquiring startups or startups acquiring established players (similar toByjus-Aakash Educational,Pharmeasy-Thyrocare,Ola Electric–Etergo, andCentrum-BharatPe-PMC Bank).

Recently,several automotive and technology companies have expressed their increasing interest in making significant investments in the Indian vehicle sector. Some examples include Mercedes, MG Motors, Tata Motors, and Hyundai, which have already brought electric vehicles into the Indian market. As per a recent study by Castrol, it is expected that most Indian consumers shall prefer investing in electric cars by 2022, and by 2030, India shall need almost $180 billion (or Rs. 12.5 trillion) to meet India’s EV ambitions in the form of charging infrastructure and vehicle production.

Further, ambitious goals have been set by the Indian government in relation to electric vehicles. 11 shortlisted cities of the country have been included by the Ministry of Heavy Industry, which shall be the suitable candidates for the introduction of electric vehicles in their public transport systemunder the FAME plan.

Further, astudy conducted by Germany-based independent consultancy firmEbner Stolz has predicted an increased momentum of mergers and acquisitions between India and Germany in the automotive, software and services, capital goods, and pharmaceuticals sectors. According to the report, with respect to the automotive industry, “the transition to hybrid and electric vehicles along with technological enhancements (such as lightweight materials) will increase collaborations and investments”. For capital goods, “increased investments in green products and sustainability are expected to drive growth”. Lastly, the report highlighted, “Electric mobility and renewable energy are being heavily promoted by the Indian government and will likely see promising developments in the near future.

It is safe to say that M&A transactions for the automotive and industrial manufacturing sectors have a promising future, not just in India but all over the world, and the coming decade shall be theirs to rule.

About the Author

Ms. Pallavi Rajpal is a Lecturer at the Jindal Global Law School.

Ms. Muskaan Aggarwal is a 3rd Year law Student from Jindal Global University (JGU), NCR. She is also an Associate Editor at IJPIEL.

Editorial Team

Managing Editor: Naman Anand

Editor’s-in-Chief: Jhalak Srivastav and Muskaan Singh

Senior Editor: Hamna Viriyam

Associate Editor: Muskaan Aggarwal

Junior Editor: Tisa Padhy

Preferred Method of Citation  

Pallavi Rajpal and Muskaan Aggarwal, “Analyzing Global M&A Trends in Industrial Manufacturing and Automotive Sectors” (IJPIEL, 16 May 2022) 


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