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navistar Class 8 RESIZED.jpg Navistar
VW subsidiary Traton’s acquisition of Navistar among blockbuster deals in 2020.

What’s Driving Automotive Dealmaking in 2021?

Coming out of 2020, strong companies have managed to recover, continue to take advantage of access to relatively cheap capital and accommodate fiscal policies in the U.S. and Europe.

In 2020, automotive dealmakers navigated a dramatic series of highs and lows – from a nearly 40% decline in global M&A deal value in the first half of last year, to a third quarter that saw over $23 billion in deal value in the automotive sector alone. 

On top of that, a change in presidential administrations with all-new tax, spending and regulatory policies added to the uncertainty and potential volatility facing the M&A market.

Coming out of 2020, strong companies have managed to recover, continue to take advantage of access to relatively cheap capital (although pressure on that is growing) and accommodate fiscal policies in the U.S. and Europe.

Yet the uncertainty of COVID-19’s continued impact and the myriad supply chain issues weighing down industry production still weigh on dealmakers’ minds, especially as they look to participate in the shift to electric vehicles, prepare for new regulations from the Biden Admin. and potential increases in tax rates, and transition to new connected, autonomous, sharing and electric (CASE) technologies.

Broadly speaking, however, the mood for auto M&A in 2021 has proved to be one of cautious optimism. As we enter the second half of the year, here are some key factors expected to drive deal activity. 

Electric Vehicles

The push toward electrification continued to drive M&A activity for the automotive industry in 2020, and is only expected to accelerate going forward – particularly given the recent moves by Volkswagen, General Motors, Ford and others toward total fleet electrification; the Biden Admin.’s push for increased EV infrastructure investment (including 500,000 public chargers by 2030) and an overall goal of net zero emissions by 2050; a growing increase in customer demand for electrified mobility; and the increasing benefits of scale in EV production.

Even in the face of economic headwinds and COVID-19’s impact on automotive sales in 2020, megadeals still occurred with Intel’s Mobileye unit acquiring Moovit for $900 million, Amazon spending $1.2 billion to acquire Zoox, Uber acquiring Postmates for $2.6 billion, BorgWarner purchasing Delphi Technologies for $3.3 billion and Volkswagen’s heavy truck unit Traton acquiring Navistar for $3.7 billion.

And upsized valuations for EV companies such as Tesla and Nio – especially compared to traditional OEMs – persist, reflecting the significant investor appetite for EVs.


A bounce-back in activity in the third quarter of 2020 was largely driven by the emergence of special purpose acquisition companies (SPACs) as a preferred method for private companies to access public capital markets. EVs and CASE technologies have proved to be particularly attractive SPAC targets: In 2021 alone, numerous such companies have announced their intention to go public through a SPAC, including electric-bus maker Proterra, charging station company EVgo, electric-truck startup Xos and Lucid Motors.

Yet heightened scrutiny from the U.S. Securities and Exchange Commission and what is perhaps a natural cool-off from such a frenetic year of activity has led to a dip in new SPAC deals recently.

With that said, many industry analysts predict SPACs to continue accelerating M&A activity in 2021 and beyond, largely driven by the number of SPACs who have not engaged yet in de-SPAC (merger) transactions; the transition to 100% electrification and the need to find partners to share the related and significant investment requirements; and an understanding that the push toward automation will require further capital  deployment.

christopher boll.jpgDistressed M&A and Industry Consolidation

Surprisingly to many, lenders in 2020 were far more accommodating to borrowers when second-quarter covenants were tripped due to COVID-19 than they were during the Great Recession.  In addition, troubled and healthy companies alike were able to stay afloat with the assistance of CARES Act programs, including the PPP.

As a result, the tsunami of distressed M&A and bankruptcies remained far below expectations in 2020. Going forward, many industry participants are wary of lenders’ willingness to accommodate continued financial difficulty through 2021, and many worry the distressed company wave may have just been delayed, not avoided.

steve hilfinger.jpgChristopher Boll (pictured above, left) is an associate with Foley & Lardner LLP and a member of the firm’s Transactional & Securities Practice. Steve Hilfinger (pictured, left) is co-chair of Foley’s Manufacturing Industry Team and has closed more than 200 M&A transactions for clients in a variety of industries.

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