John Pencak: Automotive Middle Market – What’s the Play? – ABL Advisor
John Pencak wrote an article that was published in ABL Advisor titled “Automotive Middle Market – What’s the Play?”.
Currently, we are in the seventh year of the latest automotive cycle that appears to be long in the tooth. Middle market automotive suppliers have performed well in recent years and have reaped the benefits of record North American production volumes. Now, for the first time since the Great Recession, it appears the automotive market is softening. What might that mean for prospective mergers, acquisitions and takeover activity in the automotive supplier space?
Dry powder—the amount of investible cash with private equity (PE) and venture capital (VC) funds—stands close to a six-year high of over $875 billion, data from industry sources shows. Financial buyers are attracted to the automotive sector because of its long-term contracts and predictable cash flows but they prefer to put money to work in the early stages of automotive growth cycles. Their current reticence to act would seem to speak volumes as they, of course, never want to be the guys that buy at a peak.