Services Spotlight: Market Analysis

M&A research in the world of COVID-19

There are many factors and influences within the automotive aftermarket, including some that were unimagined until recently. Given the dynamic and unpredictable events of 2020, how can we determine the future of the automotive aftermarket?

For the purposes of market analysis, we use historic data from similar times in the past, blended with the unique changes in our current environment to get a perspective for the future of our industry. We have seen and recovered from slow-downs in the past and will do so again this time.

The light duty automotive aftermarket is a very stable market with long-term positive trends. Simply put, parts and services are sold when vehicles are used. After the Great Recession vehicle miles increased at about 1.3% per year (CAGR) from 2011-2019 and sales closely matched the mileage trend.

What was the Covid-19 impact? From early March 2020 to mid-April, miles driven dropped 57%. By May 1st mileage had started to increase but was still down 44%. (1)

The predominant mode of travel in the United States is by automobile and light truck, accounting for about 69% of passenger miles traveled in 2018. Driving to and from work represents 30% of light vehicle miles driven. Other top uses include work related travel, visiting friends and relatives and driving to school, daycare and church. (2)(3) Vehicle use obviously drives maintenance, parts consumption, and even collision and repair. As people have begun, although slowly to resume their normal activities, miles driven will continue to increase and the aftermarket will rebound.

The market is indeed dynamic. When large numbers of people stayed at home and did not drive, the miles driven dropped significantly. While more people have returned to their workplaces, the lingering work-from-home impact will likely affect the aftermarket to some degree. The variables that determine the durability of the work-from-home trend are complex and largely unknown at this point. At the time of writing, the impact of widespread home offices on productivity, morale, and profitability are not known.

The long-term work-from-home trend is also a study in human behavior. Densely populated cities, with often fewer miles driven per capita are seeing an exodus to the suburbs and less dense, and less expensive areas were cars are a necessity and mobility and pandemic restrictions are reduced. With no relevant data in our history, the viability of work-from-home and its widespread impact remains speculative.

There are always opportunities. Some companies are more aggressive in finding or making the opportunities necessary for profitable sales. Other companies may just be in the right place at the right time with their offering. In some cases, consolidation can be a savvy option to achieve profitability in a challenging market by reducing operating expenses, inventory, equipment, and facilities.

Like most business activity, M&A slowed in Q2 as investors evaluated their current holdings and developed short and long-term plans to move forward. Now, some investors are beginning to look for troubled businesses. Others are cautiously resuming searches for appropriate bolt-ons to current investments as well as strong platforms based on solid historic performance and future market potential.

M&A in the automotive aftermarket is moving forward. Activity and interest from investors and companies looking for opportunities that match their criteria is increasing. Investors believe in the long-term stability of our market and its long-term growth potential, backed by historic data and performance. Selecting the right opportunities is a key to success.

HMA’s extensive automotive market experience allows us to find the right opportunities for our clients, both buyers and sellers. We do extensive and transparent research rooted in our wide network of contacts and resources developed over decades in the industry. HMA delivers a significant level of detail in acquisition searches that are tailored to each client’s needs.

John Nodson
Vice President, Research
Hart Marx Advisors
jhnodson@hartmarxadvisors.com

(1) Source: Auto Care Association Factbook 2021, Jefferies Group, Arity, Municipal Open Data Portals, TomTom, GTCOM, AutoNavi
(2) U.S. Department of Transportation (DOT), Federal Highway Administration (FHWA) (2019) Highway Statistics 2018 (details)
(3) Center for Sustainable Systems, University of Michigan 2019. Personal Transportation Factsheet Pub. No. CSS01-07

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Before leaving on a journey it’s always useful to have a map to navigate your way from where you are to where you want to go. Hart Marx Advisors has identified five phases of the lifecycle of a merger, acquisition, or divestiture. Learn about Phase 1: Pre-Deal Preparation.

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How has aftermarket mergers & acquisitions changed since early 2016? Understand your company’s unique proposition and how that will change.

Download Presentation: CAWA 2017: Market Changes & Understanding Your Unique Proposition

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CAWA 2016: How You Can Benefit from Aftermarket Consolidation

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Consolidation introduces change and with it opportunity to achieve growth beyond current industry standard projections for organic-only growth.

Download Presentation: CAWA 2016: How You Can Benefit from Aftermarket Consolidation

SEMA 2011: Acquiring or Selling: Preparing your Business to Achieve Maximum Value

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Whether you are a seller looking to retire or divest an unprofitable or poorly integrated business, or a buyer that realizes the value of growth through acquisition, the goal is the same- to position your company for maximum perceived value.

Download Presentation: SEMA 2011: Acquiring or Selling: Preparing your Business to Achieve Maximum Value

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70% of all small and mid-sized businesses who are thinking of selling their business don’t sell. In order to prepare and follow-through with the right ways to successfully value and sell their business, the following information should be considered:

  • Why an exit strategy is necessary
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  • Why non-disclosure agreements are important and what they should include
  • How deals are usually structured
  • How to get the price/terms you want
  • What you should expect from buyers and why backup offers are critical
  • The closing process: escrow, transition issues, and closing the deal

Download Presentation: SSA 2011: The Art of Buying and Selling an Aftermarket Business

PERA 2013: ASPECTS OF BUYING/SELLING A SMALL BUSINESS

Presented by Tom Marx 
In this webinar we will answer many of the common questions people ask about selling and valuing their business, including the necessary paperwork and information needed to get a business ready to go to market, what to look for from a broker or agent, and how deals are structured. We will also look at proven steps to follow to increase the chance of closing the sale of a business.

Topics to be covered include:

  • What paperwork and information to get ready before going to market
  • Why understanding your tax returns and financials are so important
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  • Why financing could be important to your deal structure
  • What you should look for from a broker or agent
  • Understanding business buyers and what is important to them
  • Why non-disclosures are important and what they should say
  • How deals are usually structured
  • How to market a business for sale to get the price/terms you want
  • What you should expect from buyers and why backup offers are critical
  • The closing process: escrow, transition issues, and closing the deal

Download Presentation: ASPECTS OF BUYING/SELLING A SMALL BUSINESS

Why Use a Mergers and Acquisition Intermediary?

Byline
First, the full disclosure: we can’t be 100% objective about this question because we are merger and acquisition (M&A) intermediaries. That being said, this is exactly what qualifies us to write this article. We have the experience to know what works and what doesn’t, and we have seen many cases where engaging the services of an intermediary has helped make a deal that would otherwise break.

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Download White Paer (PDF): MGATransaction Types of Mergers and Acquisitions

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There are five phases of a merger or acquisition that, if fully respected and developed, can make the difference between a successful transaction that works for all parties involved and lay the groundwork for seamless transition, or if ignored or under-executed can spell disaster.

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  2. Due Diligence
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  4. Post-Close Planning
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Download White Paper PDF: MGALifecycles of Mergers and Acquisitions

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