With cash less available and with significant pressure to invest in emerging mobility fields, many suppliers are asking whether it might be best to divest some of their businesses or open themselves up to an acquisition or merger. According to the Deloitte study, that means that suppliers or private equity firms could find bargain acquisitions now.
“There may be a number of undervalued players that would be attractive targets for either strategic or financial buyers looking to take advantage of current conditions,” the study reads. “Indeed, the potential for more M&A activity on the horizon in the supply sector is growing rapidly.”
The conditions for increased M&A activity could persist into next year as suppliers scramble to find their place in the new market for EVs, Flanagan said.
“Some suppliers have solid positions, while others are still searching,” he said.
The shift to electrification is also putting new financial pressure on some legacy suppliers. The Deloitte study projects that total revenues for electric drivetrains and battery fuel segments will surge 245 percent from 2022 to 2027, while revenue from components related to internal combustion engines will dip 44 percent in that time, it forecasts.
But Flanagan believes many suppliers are being proactive in making plans to weather the disruption.
“They’re not just sitting there taking this,” he said. “There are just certain things that are out of their control in the near term.”
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