The report by McKinsey & Company titled "M&A, value creation, and the automotive aftermarket" identifies seven key themes for creating value through mergers and acquisitions (M&A) in the automotive aftermarket industry. These themes include:
- Leveraging ICE technology: Companies should continue to utilize internal combustion engine (ICE) technology as long as it remains practical.
- Electrifying the portfolio: Expanding product offerings and strengthening capabilities related to electric vehicles (EVs) can help secure the future of the portfolio.
- Sustainability and circular economy: Building a portfolio that includes assets and capabilities in areas like remanufacturing, reuse, and recycling is crucial.
- E-commerce: Entering and enhancing capabilities in e-commerce to capitalize on growing online distribution channels.
- Data-driven business models: Developing and scaling data-driven business models to access emerging profit pools.
- Connecting and activating the ecosystem: Forming alliances with peers to consolidate and professionalize operations during technology transitions.
- Continued focus on core operations: Enhancing existing operations while pursuing larger-scale and improved strategies through horizontal mergers.
The report further highlights that the majority of European executives surveyed anticipate an increase in M&A activities, largely driven by strategic investors. The automotive aftermarket is expected to grow, albeit at a slower pace post-2025 due to factors such as electrification, autonomous driving, and new mobility concepts impacting demand for aftermarket services. Key drivers for M&A are expected to be electrification, sustainability, and the circular economy, alongside e-commerce.
Market dynamics, technological advancements, and regulatory pressures are driving the industry towards sustainability and the circular economy. Companies are increasingly relying on M&A to adapt their business models, expand their offerings, and strengthen their capabilities in EV-related areas.
Relevance of these M&A themes varies across different sectors of the automotive aftermarket, with electrification being a top priority across sectors. E-commerce companies and repair shops place more emphasis on online distribution acceleration, while parts manufacturers and data and services providers prioritize the scaling of data-driven business models. Different lines of business within the aftermarket present attractive M&A targets, with OEMs and intermediaries seeing remanufacturing as particularly attractive.
Many respondents wish to conduct more M&A but lack a clear strategy, indicating a need for guidance and action plans to navigate the changing landscape effectively.
