CONSOLIDATION OF THE EUROPEAN AUTOMOTIVE AFTERMARKET - Hugues Archambault Founding Partner - The Bridge presentation
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CONSOLIDATION
OF THE EUROPEAN
AUTOMOTIVE AFTERMARKET
Hugues Archambault
Founding Partner
Brazil Aftermarket Workshop – Automechanika Frankfurt – Sept. 12th, 2018
THE BRIDGE: INTRODUCTION
The Bridge Corporate Finance advises entrepreneurs and companies
on all their strategic and capitalistic projects
THE BRIDGE HELPS YOU THE BRIDGE WORKS WITH
§ Define your strategy
§ Acquire a business
§ Divest a business
§ Optimize your long-term
financial structure
§ Adjust your equity/
shareholder base
EUROPE: KEY FACTS • Countries: >50 • Area: 10 million km2 (Brazil: 8.5) • Population: 750 million (Brazil: 200) • GDP: $23 trillion (Brazil: 2.1) • # of cars(1): 325 million (Brazil: 35) FRANKFURT • # of CVs(1): 55 million (Brazil: 7) Sources: UN Department of Economic and Social Affairs 2017, IMF 2018, ACEA Vehicles in Use Report 2017, OICA 2015 Notes: (1) Incl. Russia, Turkey and the Ukraine. EU countries marked in yellow
THE AUTOMOTIVE AFTERMARKET: SIZE The European aftermarket represents c. $240 billion, i.e. c. 31% of the world’s Sources: McKinsey market model; expert survey among CLEPA members (February 2017) Notes: Figures in $ billion including parts, labor, maintenance, and crash-related revenues 2 US, Canada, and Mexico 3 Incl. India 4 South America, Africa, and Oceania
THE AUTOMOTIVE AFTERMARKET: VALUE CHAIN
The IAM accounts for 50-75% of the European aftermarket depending on the strength of
OE networks in each country
Parts manu-
facturers
Automotive
suppliers
Bosch, Indepen-
Valeo, ZF dent
Buying distributors
groups Autodis,
ATR, Nexus, LKQ,
Carat Wessels+
Müller
Source: McKinsey
THE EUROPEAN AFTERMARKET: SEGMENTATION
The addressable market for independent distributors represents c. $120 billion
Sources: 2014 Datamonitor, LKQ
(1) Do-It-yourself e-commerce onlyTHE EUROPEAN AFTERMARKET: CONSOLIDATION LEVEL BY COUNTRY
Consolidation is well advanced in
Germany, France, Benelux and Top 3 Market Share: 58%
Scandinavia...
...but large markets such as Italy, Spain Top 3 Market Share: 19%
and Poland are still very fragmented
Top 2 Market Share: 55%
Top 3 Market Share: 39%
Highly fragmented
Top 3 Market Share: 30%
Sources: Uni-Select, The Bridge Corporate FinanceTHE EUROPEAN AFTERMARKET: THE LEADING DISTRIBUTION GROUPS
A handful of distributors generate revenues in excess of €1 billion
The largest, LKQ only holds c. 6% of the European market !
Leaders usually derive 50% or more of their revenues from acquisitions !
Turnover 1,1
(€’billion)
4,7
1,7 1,7 1,6 1,4
1,1
0,8
0,5
0,3
Turnover LKQ Europe GPC/AAG Inter-Cars W+M Autodis Mekonomen SAG Europart Uni-Select/TPA
acquired (%) 100% 100% 0% 50% 40% 75% 50% 25% 100%
Sources: Company reports and presentations, The Bridge Corporate Finance estimates
8CONSOLIDATION IN EUROPE: WHY?
Consolidation boosts the bottom line even more than top line!
n Market share gain
Expansion n Geographical expansion
n Vertical and horizontal integration
n Premium products
Lower procurement costs
n Private label products
n Back-office
Reduced overhead costs n IT
n Catalogue
n Higher visibility
Brand economies of scale
n Mutualized brand costs
n Asian sourcing
Logistics & warehousing n Slow movers
n Distribution to clientsVALUATION IN M&A TRANSACTIONS
Financial investors have created a lot of value from consolidation !
Trade buyers Financial investors
12,3x 12,1x
11,7x
Average
9,7x 10,0x 9,7x
EV/EBITDA: 9,0x
10x
7,6x
6,2x
Oct. 2011 Oct. 2013 Aug. 2014 Oct. 2015 Dec. 2015 Aug. 2017 Nov. 2017 May 2018 Sep. 2018
Target
Target country
Buyer
Buyer country
Enterprise
256 560 440 615 1,040 235 1,695 1,500 395
Value (€’m)
Sources: Company information, Mergermarket, press articles, The Bridge Corporate Finance intelligenceWHAT CAN WE EXPECT ?
M&A activity will continue to be intense with more focus on post-deal activities
Further consolidation of n LV ++
traditional distribution n CV +
n E-commerce ?
Vertical integration n Repair services ?
n Technologies +
Horizontal integration n Car makers -
n Inbound +
Transatlantic deals
n Outbound -
n Deliver synergies ++
Focus on integration
n Create real groups ++THANK YOU FOR LISTENING !
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