Selling Automotive Suppliers in Difficult Times
Times have never been tougher for Automotive suppliers anywhere in the world as in spring 2020. Dr. Burkhard Weber, Partner at IMAP Germany, talks about the new challenges brought about by the COVID-19 pandemic and its impact on an already difficult landscape in the Automotive sector
The COVID-19 global health crisis and its fallout, including the multilateral production shutdown of many of the most important automotive OEMs across Europe and North America, along with a disruption of otherwise well functionable supply chains, pose an enormous challenge to automotive suppliers – many of which are family-controlled enterprises with limited resources.
Despite generous government support to keep businesses afloat, the reality-check is yet to come, whereby we will see which businesses will prevail and which are unable to survive in their current set-up. Even worse, surviving the crisis will not eliminate the existing challenges facing the Automotive sector: managing the transition to alternative drive technologies, in particular e-mobility, autonomous driving and individual mobility.
“Many automotive entrepreneurs, in particular those already facing operational margin pressure and high debt levels pre-crisis, will feel overwhelmed by the magnitude of challenges ahead and the equity resources needed to secure financial stability during and after the crisis”.
Many automotive entrepreneurs, in particular those already facing operational margin pressure and high debt levels pre-crisis, will feel overwhelmed by the magnitude of challenges ahead and the equity resources needed to secure financial stability during and after the crisis. It is expected that a considerable number of entrepreneurs will soon look to raise restructuring capital or consider an outright sale to secure existing family wealth locked up in their businesses. Larger groups are expected to accelerate decision-making to spin off non-core businesses, especially when they turn cash negative and require bolstering the equity base.
Securing a Long-Term Future for the Business
With such a challenging landscape and still so many uncertainties over the coming months, for some businesses, selling to a new owner willing to commit
time and resources in order to turn the business around, is a highly desirable option. IMAP Germany, with its years of experience in the Automotive sector has access to strategic buyers and financial investors specialized in acquiring businesses in special situations. There are no less than 2 dozen of such organizations based in German-speaking Europe, keen to acquire companies
under some form of distress, such as shareholder crisis, liquidity crisis or management crisis. They typically infuse fresh equity and commit management resources in order to turn the target around, frequently teaming up with current shareholders, e.g. owner family members granting a minority share, which is likely to be worth more post turnaround versus than the current sole family ownership is now and probably has been for some time.
“IMAP Germany, with its years of experience in the Automotive sector has access to strategic buyers and financial investors specialized in acquiring businesses in special situations”.
IMAP Germany recently advised on the successful sales of 3 automotive suppliers, all of which were operating in a challenging trading environment. The investors were both publicly listed and private investor groups focusing on special situations.