M&A trends in industrial manufacturing and automotive: 2023 outlook

Disciplined M&A offers opportunities to gain new capabilities and transform the business in a challenging environment

Michael Huber, Director, Corporate Finance/M&A, PwC Switzerland

Michael Huber
Director, Deals Industrial, Manufacturing & Automotive, PwC Switzerland

2022 was a difficult year for the industrial manufacturing and automotive (IM&A) sectors, and M&A activity slowed to pre-pandemic levels. Looking at 2023, this challenging environment offers opportunities for long-term value creation through strategic deals. What about developments in Switzerland?

Slowing GDP growth, the war in Ukraine, the energy crisis, rising interest rates, and inflation led to a decline in M&A activity in 2022, after a record high of deal activity in 2021. For 2023, with signs that inflation may have peaked and that interest rates could start to stabilise, we believe that industrial manufacturing and automotive (IM&A) companies with strong balance sheets and sector-focused private equity buyers still sitting on a lot of dry powder will continue to pursue deals. We therefore expect M&A activity to remain stable and companies to be able to create long-term value through strategic acquisitions.

In the near future, the valuation gap between buyers and sellers may prevent some deals from being completed, but motivated dealmakers will find ways to close this gap by means of more robust due diligence and alternative deal and purchase price payment structures. Particularly for dealmakers in the automotive industry, 2023 looks set to bring many M&A opportunities. The industry's ongoing transition to electric vehicles (EVs) creates an environment in which managements will need to invest and transform their businesses to remain competitive.

Innovative key technologies driving the transformation of the IM&A sectors include EV batteries, charging stations, cloud, AI, robotics, data analytics, and cybersecurity. As all these areas require highly skilled people and capabilities, companies will need to reconsider their workforce strategy which might lead to more “acqui-hire” M&A transactions.

ESG has become a topic that is no longer just a check-the-box due diligence task, but a long-term lever for value creation and critical differentiator. Target companies that can demonstrate alignment with both their respective investment objectives and broader ESG goals will be able to attract the interest of a broader group of potential acquirors.

Last but not least, portfolio optimisation remains a strong driver of M&A activity in the IM&A sectors. We see a growing trend of divesting assets to free up management capacities and capital for new investments focused on sustainability and to accelerate their digital transformation. There might also be an uptick in distressed M&A if current economic headwinds extend further into 2023.

What drives M&A in industrial manufacturing and automotive in 2023? 

Industrial manufacturing

M&A activity in industrial manufacturing should be stable in 2023, despite the challenging environment for dealmakers. We believe industrial manufacturing companies will use M&A to support their key strategic priorities including stabilising supply chains and acquiring much-needed digital capabilities.

Furthermore, we expect leaders to take a closer look at portfolios and free up management resources and capital for reinvestment in higher growth areas and to be more focused on their strategic priorities by divesting non-core assets. Buyers of these assets are likely to be small and mid-sized companies as well as PE portfolio companies with strong balance sheets looking to expand their platforms and programmes either strategically or opportunistically.

As customers and investors increasingly focus on ESG initiatives, industrial companies are reviewing their ESG footprint and searching to acquire products and capabilities that will help them achieve their ESG objectives.


In the automotive industry, dealmaking might start slowly in the first months of 2023. There is a growing uncertainty on the demand side, and there are headwinds from the supply side. Although supply chain challenges arising from the semiconductor shortage and from production disruption due to Covid-related shutdowns have eased in recent months, high energy prices and access to raw materials still hamper production.

We expect M&A activity from companies near-shoring critical components or relocating such assets to more geopolitically stable countries. Cross-sector M&A could be supported by automotive original equipment manufacturers (OEMs) securing product purchases directly from miners of key minerals for battery production and thus reducing their dependence on traditional suppliers of these materials. The trend to more digitalised and software-powered vehicles in the future will fuel further investment in new technologies, especially in computer aided software engineering (CASE) assets.

As part of the ongoing portfolio optimisation in 2023, we will see acquisitions for key competencies as well as selective divestments. Some OEMs are already cutting back their investments in autonomous driving and sharing businesses to focus on their core operations. The fact that many suppliers are facing squeezed margins, higher inventory levels, and working capital issues could lead to an increase in distressed M&A.

Industrial manufacturing and automotive deal volumes and values, 2018-2022

Bar chart showing M&A volumes and values for the industrial manufacturing and automotive sectors. Deal volumes and values declined in 2022 across all sectors and regions as macroeconomic and other headwinds increased.

Sources: Refinitiv, Dealogic and PwC analysis

“Portfolio optimisation and divestitures will drive new dealmaking activities in the IM&A sector at a worldwide level in the first six months of 2023. The second half of the year could see a normalisation of market conditions, with inflation flattening and interest rates stabilising”.

Michael Huber,Director, Deals Industrial, Manufacturing & Automotive, PwC Switzerland

M&A trends in the Swiss industrial manufacturing and automotive sector

Portfolio optimisation and thus corporate carve-outs and spin-offs are currently one of the major drivers for M&A activity in Switzerland, with manufacturing companies transforming their business and repositioning themselves for further growth. A perfect example is ABB, which sold its power conversion and UK technical engineering consultancy businesses as well as its remaining stake in Hitachi Energy, spun off its Accelleron turbocharging business, while acquiring several assets to strengthen its traction offering and EV charging solutions business, all in less than 12 months.

Deal activity in the automotive sector is, in turn, much more characterised by the ongoing market turmoil and thus distressed M&A. The automotive supplier market is currently experiencing a strong consolidation, with healthy and well-capitalised contenders picking up the business of weaker rivals to emerge even stronger once the market recovers. A recent example is Autoneum’s acquisition of the business of its insolvent German rival Borgers, which was no longer able to cope with rising energy and raw material prices. But not every struggling automotive supplier will find refuge under the umbrella of a bigger and healthier rival. A tragic example is the recently announced closure of Benteler’s Steel/Tube production plant in Rothrist. It used to supply powertrain components for combustion engines, which will be banned in the EU as of 2035.

On the buy side, private equity funds continue to be serious rivals to trade buyers when it comes to picking up well positioned industrial assets. Although interest rates have risen recently, acquisition financing for high-quality industrial assets with stable business models and predictable cash flows is still possible at reasonable conditions. A good example is the recent acquisition of a majority stake in Lucerne-based Schurter Group by Swiss investor Capvis.

2023 outlook: M&A in industrial manufacturing and automotive will be driven by the need to access new technologies, secure supply chains, and improve the ESG footprint.

The global macroeconomic and geopolitical events of the past year have impacted growth prospects and profitability of many IM&A sectors, and the M&A environment remains challenging. Companies that are able to use this period as an opportunity to review their portfolios, pursue M&A to acquire new technology-enabled and data-driven assets – and perhaps venture into new sectors – will be well positioned to create long-term value. All of this points to a stable level of transaction activity in 2023.


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