SPACs impacting autotech exit market, says Hampleton Partners

The latest Autotech M&A market report from Hampleton Partners, the international technology mergers and acquisitions advisor, reveals how two of the three largest autotech transactions during the second half of 2020 were led by “special purpose acquisition companies” (SPACs). 

The largest acquisition in Autotech was by Gores Metropoulos’ acquisition of Luminar Technologies for USD3.4 billion in August 2020, after which it listed the company on the Nasdaq. Luminar Technologies provides advanced long-range, high resolution lidar and perception systems to enable safe autonomous transportation. 

The third largest acquisition was by SPAC Thunder Bridge, which acquired “system-on-chip” manufacturer Ay Dee Kay, now known as Indie Semiconductor for USD1.5 billion. Indie Semiconductor’s integrated semiconductor and software solutions underpin new automotive applications. 

Overall, the Autotech sector saw an increase in the number of M&A transactions in the second half of 2020, with 50 deals inked, a 25 per cent increase compared to the 40 deals recorded in the first hald of 2020 and the highest level since the second half of 2017. 

Covid-19 hit the automotive supply chain and various strategic players hard in the first half of 2020. As the coronavirus crisis unfolded, the car industry saw its supply chain constrained, with limited access to parts and raw materials sourced from China. At the same time, the market saw a drastic reduction in demand, with sales tumbling in the face of unemployment and financial uncertainty. 

The EU suffered a 24 per cent drop in new passenger car registrations in 2020. France, Italy and Spain, all heavily affected by the Covid-19 pandemic, suffered above-average sales declines of 26 percent, 28 per cent and 32 per cent in 2020, respectively. 

Germany, the EU's largest automobile market that had a good handle on the pandemic for long stretches of 2020, saw registrations drop by "only" 19 per cent.  

The second half of 2020 looked very different for the automotive sector, with car sales in Europe exceeding the pessimistic predictions from early 2020. 

Miro Parizek, principal partner, Hampleton Partners, says: “Ultimately, the vaccine rollout that began at the end of 2020 has provided some hope for the automotive market after pandemic-related restrictions and a drop in productivity. This newfound optimism, supported by stable consumer spending and purchases financed with cheap debt, translated into market confidence. 

“What onlookers had predicted would be a monumental decline turned out to be more of a short-term hit. Car sales in China bounced back at phenomenal speed, and car sales in Europe returned to more normal levels in the second half of 2020, with a flurry of activity over the summer of 2020. 

“We believe this positive trend is likely to continue, forcing the auto industry to shift focus back to advancements in research, development and technology which will all drive M&A activity.” 

Hampleton’s Autotech M&A report analyses transactions, trends and activity across the Enterprise Applications, Internet Commerce & Content, Embedded Software & Systems, and Mobility & Fleet Management segments of the sector.